mmmmuiH&mmmmmmmmm*isimiimmiwiMmwwmmm 


UNIVERSITY  OF  CALIFORNIA 
AT  LOS  ANGELES 


GIFT   OF   CAPT.   AND    MRS. 
PAUL  MCBRIDE  PERIGORD 


LOS  ANGELES 
LIBRARY 


Untaxing 
The  Consumer 

(INTERWOVEN   PROBLEMS) 

BY 

WILLIAM  THUM 


•    , 


Thi  Oeawt  Prim 

I'akaiiilna    California 
■  018 


Copyright, 1918, 
By  William  Thum. 


INTRODUCTION.  ^ 

Although  this  book  deals  largely  with 
the  untaxing  of  the  consumer,  in  addition 
to  that  its  first  two  chapters  treat  the  land 
question  in  its  relation  to  taxes  —  espe- 
cially Single  Tax — -and  likewise  in  relation 
to  prices  of  commodities.  The  purpose  is 
really  to  ask  questions  and  not,  as  might 
seem,  to  offer  convictions  or  facts;  also  to 
show  advocates  of  various  tax  systems  the 
nature  of  the  numerous  thoughts  and 
questions  that  are  likely  to  arise  when 
citizens  are  pondering  how  to  vote  on 
Single  Tax  and  other  tax  laws.  Some  of 
these  questions  are  old  and  have  been  dis- 
cussed many  times,  while  others  are  new 
and  have  as  yet  received  little  attention, 
though  they  bear  on  the  old  and  make  it 
-^  necessary  to  seek  new  answers.  The  re- 
od  maining  chapters  show  how  we  can  elimi- 
^  nate  the  always  troublesome  tax  problem 
^  from  the  last  great  natural  resource  still 
remaining  in  possession  of  the  public. 

Since  the  book  is  in  a  measure  equiva- 
lent to  an  assortment  of  questions,  the 
relation  between  paragraphs  sometimes 
appears  slight,  the  less  material  connect- 


VJ 


ii  INTRODUCTION 

ing  links  having  been  discarded  to  shorten 
the  text.  However,  the  drift  is  toward  a 
definite  plan. 

Lack  of  time,  because  of  the  near  elec- 
tion-date (November,  1918)  will  prevent 
this  work  from  having  any  appreciable 
effect  on  the  pending  Single  Tax  campaign 
in  California.  But,  if  any  suggestions  of 
value  have  been  made,  I  hope  they  may 
enter  into  the  thoughts  of  some  leading 
workers  for  or  against  the  Single  Tax  or 
other  tax  campaigns  elsewhere  and  be 
used  according  to  the  good  they  may  do. 

The  tax  question,  coupled  with  insep- 
arable economic  questions,  creates  a  prob- 
lem so  deep  and  complicated  that  the 
best  amateurs  soon  become  lost  in  a  quest 
for  its  solution.  To  solve  the  problem  by 
nation-wide  experimentation  formulated 
by  men  of  insufficient  experience  would 
take  hundreds,  if  not  thousands,  of  years, 
and  would  do  avoidable  harm  in  the  mean- 
time to  the  American  public.  Some  way 
ought  to  be  found  to  appoint  a  commis- 
sion of  life-time  experts  on  taxation  and 
economics,  composed  of  people  who  pos- 
sess the  broadest  possible  social  training 
and  experience  and  who  can  be  influenced 
by  nothing  except  facts  as  they  see  them 
after  due  study.     They  should  be  men 


INTRODUCTION  iii 

who  measure  up  to  the  reputation  of  Pro- 
fessors Richard  T.  Ely  and  Thomas  S. 
Adams  of  Wisconsin,  Professor  R.  A. 
Seligman  of  Columbia  and  Professor  0. 
M.  W.  Sprague  of  Harvard.  Their  task 
should  be  to  formulate  in  detail  a  tax  plan 
and  work  out  a  revision  of  such  part  of  the 
social  system  as  may  be  imperative  in 
making  fair  taxation  possible,  and  what 
is  of  equal  importance,  the  commission 
should  devise  a  thorough  scheme  for  fully 
informing  the  public  regarding  this  plan 
and  for  putting  it  into  practice. 

Why  do  Congress  and  our  State  law- 
makers leave  this  vital  problem  to  be 
bungled  over  by  self-appointed  amateurs 
like  the  writer  of  the  present  book,  and 
others?  A  development  of  the  answer  to 
this  question  would  reveal  the  reason  why 
it  is  so  frequent  that  progressive  economic 
and  social  moves  are  inaugurated  only 
after  amateurish  self-appointed  econom- 
ists and  sociologists  become  a  serious  men- 
ace to  progress  itself. 

The  Author. 

Pasadena,  California,  October,  101H. 


CONTENTS. 

PAGE 

Introduction  .  .  .  vii 

The  Land-Tax  Payer.     Who  is  He?  1 

The  Other  Side  of  Single  Tax  and  Prob- 
lems Connected  with  It  12 
Other  Kinds  of  Taxes 
Business  Regulation 
Price  Fixing 
Distribution  of  Supplies 
The  Human  Element 
Public  Ownership 
State  Land  Settlement  Scheme 
Better  Farming 
Free  Farms 
Free  "Land" 

Free  Water  ...  74 

Successful  Public  Ownership  .  77 

Hydro-Electric  Power 
Social  Meaning  of  Water  Power 

Connection  of  Universities  with  the  Water 

Power  Problem  .  •  •  vv 

A  New  Relationship 


UNTAXING 
THE  CONSUMER 

(INTERWOVEN  PROBLEMS) 


UNTAXING  THE  CONSUMER. 


THE  LAND  TAX  PAYER,  WHO  IS  HE?* 

Public  funds  can  be  raised  by  levying  taxes  on : 
articles  of  consumption  generally;  the  right  to  do 
business;  net  private  incomes;  all  kinds  of  prop- 
erty, including  land;  land  exclusively;  and  also  by 
taxation  in  many  other  ways.  And,  aside  from 
ordinary  methods  of  taxation,  funds  can  be  raised 
through  profits  earned  by  public-owned  utilities 
and  other  public  activities. 

Since  the  largest  share  of  public  funds  is  ob- 
tained through  taxing  real  estate,  land-tax  comes 
to  mind  first  in  any  general  study  of  the  tax  ques- 
tion, and  about  the  first  point  that  presents  itself 
is  the  seeming  similarity  and  relationship  between 
tax  on  land  and  that  levied  directly  on  articles  of 
consumption,  both  of  which  kinds  of  taxation  are 
borne  by  the  consumer. 

What  the  Single  Taxer  Means  by  "Land." 

When  the  advocate  of  Single  Tax  speaks  of 
"land",  he  has  in  mind  agricultural  land;  industrial 
and  commercial  sites;  oil,  coal,  iron  and  other 
mineral  deposits;  forests;  water-power  sites,  in 
fact,  everything  useful  to  humans  in  its  natural 
and  undeveloped  state,  except  air,  sunshine,  and 

Foot  Note: — This  chapter,  though  herein  somewhat  reviaed.  «u 
originally  written  as  an  article  for  the  "Out-West  Magazine,"  and  appeared 
in  its  number  for  October  1016,  under  the  caption  of   'Tax  Problems." 

1 


2  UNTAXING  THE  CONSUMER 

rain,  even  though  they  are  themselves  equivalent 
to  "land"  in  cases  where  they  cause  a  special  and 
unusual  advance  in  the  value  of  land.  In  the 
present  article  the  word  "land"  will  be  employed 
in  this  sense. 

Used  Land  Would  Soon  Yield  All  the  Taxes. 

The  Single  Tax  system  provides  that  all  funds 
used  for  public  purposes  shall  be  raised  by  taxing 
land  alone,  all  other  methods  of  raising  public 
moneys  being  abandoned.  This  would,  of  course, 
necessitate  much  higher  taxes  on  land  and  would 
doubtless  result  in  so  much  of  it  being  put  to  use 
as  could  under  the  new  conditions  created  by  this 
kind  of  taxation  be  profitably  employed  both  by 
the  private  individual  and  the  general  public*  Not 
all  land  can  be  put  to  use,  for  the  tfeason  that  more 
of  life's  requirements  would  be  produced  than 
could  be  consumed  by  our  present  population,  and 
land  for  which  there  is  no  early  use  in  prospect — 
or  surplus  land — would,  therefore,  have  to  be 
abandoned  by  present  owners  as  soon  as  the  tax 
burden  became  too  heavy  for  them.  In  conse- 
quence, it  would  revert  to  the  state  and,  until 
again  sold,  would,  of  course,  yield  no  taxes.  The 
land  used  by  private  individuals  would  have  to 
meet  all  taxes  required  to  pay  expenses  of  govern- 
ment. It  is  true  that  no  inconsiderable  portion  of 
the  unused  and  some  of  the  partially  used  land, 
especially  in  the  country,  is  taxed  very  lightly  at 
present  and,  if  this  tax  should  be  eliminated 
through  reversion  of  such  property  to  the  public, 
the  effect  on  the  tax  rate  of  the  used  land  might 
be  negligible;  but  much  of  the  unused  land  in 
cities  is  today  taxed  heavily. 


UNTAXING  THE  CONSUMER  3 

Land  Tax  Borne  by  Consumer. 

Speaking  in  general  terms:  whatever  the  tax 
levied  on  any  kind  of  land,  it  is  passed  along  to 
the  consumer  of  products  derived  from  that  land, 
whether  the  products  be  tangible  or  intangible. 
The  tax  on  farms  is  paid  by  consumers  of  farm 
products.  Take  the  wheat  farm,  for  instance — 
the  consumers  of  wheat  and  things  made  of  it,  like 
flour  and  bread,  pay  the  tax  on  these  farms.  This 
becomes  clear  when  we  stop  to  realize  that  the 
wheat  grower  must  pay  the  taxes  on  his  land  with 
the  money  received  for  his  wheat,  and  he  must 
get  enough  for  his  wheat  to  pay  his  taxes,  farm 
expenses  and  living  costs  and,  in  the  average  year, 
a  surplus  covering  not  less  than  the  minimum  for 
which  he  will  engage  in  the  growing  of  wheat. 

However,  sometimes  he  is  willing  to  pay  the 
taxes  out  of  his  minimum  surplus,  because  of  a 
chance  of  getting  back  the  amount  so  paid,  with 
good  increase,  out  of  speculative  ^ains  from  the 
sale  of  his  property. 

Excepting  where  expressly  stated  land  taxes 
are  herein  discussed  irrespective  of  rent  and  re- 
gardless of  the  influence  of  taxes  on  rent;  the  pur- 
pose being  to  learn  who  pays  them.  Should  agri- 
cultural land  suddenly  be  relieved  to  a  material 
extent  from  its  present  taxation,  the  wheat  grower 
would  at  first  reap  just  that  much  more  profit;  but 
such  a  condition  undoubtedly  would  attract  more 
men  to  growing  wheat,  until  in  the  course  of  time 
the  price,  on  account  of  increased  supply,  would 
change  until  only  a  normal  profit  would  again  pre- 
vail. That  is  to  say,  the  average  profit  on  wheat 
the  country  over  would  gradually  become  lower 
following  the  reduction  of  tax'*s,  until  the  annual 


4  UNTAXING  THE  CONSUMER 

savings  to  wheat  growers  due  to  such  reduction 
would  be  entirely  wiped  out,  and  the  price  paid 
for  wheat  by  the  purchaser  would  no  longer  in- 
clude the  extra  amount  formerly  paid  for  taxes  on 
the  land.  This  condition  would  not  apply  to  any 
certain  locality,  nor  to  any  one  year;  but  to  wheat 
farms  taken  as  a  whole  over  a  cycle  of  years. 

If,  on  the  other  hand,  instead  of  being  more 
lightly  taxed,  agricultural  lands  were  subjected  to 
double  the  present  assessment,  the  growers  of 
wheat  as  a  whole  might  at  first  suffer  a  loss  in 
profit  equal  to  the  total  of  such  extra,  or  additional, 
taxes  paid;  but  in  a  short  time  some  growers, 
whose  reduced  profit  would  no  longer  provide  a 
minimum  surplus  for  which  they  would  raise 
wheat,  would  cease  growing  it,  and  the  absolute 
or  relative  lessening  of  supply  resulting  as  a  con- 
sequence would  cause  a  gradual  change  in  prices 
so  as  to  again  advance  the  profit  until  the  double 
assessment  was  fully  covered  and  the  original 
minimum  of  profit  re-established. 

In  the  two  preceding  paragraphs  increase  and 
decrease  in  profits  is  referred  to  only.  No  mention 
is  made  of  increase  and  decrease  in  price,  but  of 
"change  in  price,"  although  enlarged  profits  tend 
to  increase  price  and  reduced  profits  tend  to  de- 
crease it.  The  writer  has  done  this,  because  an- 
other element  affecting  the  price  of  wheat  enters 
into  the  problem.  For  instance,  if  agricultural 
land  were  made  more  nearly  tax-free,  under  the 
present  system  of  private  ownership,  land-mo- 
nopoly would  be  strengthened.     (See  foot-note.) 

Foot  Note:— If  land  taxes  were  to  be  removed  entirely,  while  all  other 
economic  conditions  were  allowed  to  remain  as  they  have  been,  land  mo- 
nopoly, as  revealed  in  rents,  would  soon  become  intolerable.  Not  many 
years  ago  this  was  the  condition  in  nations  where  large  holdings,  constituting 
in  the  aggregate  a  great  area  of  the  country,  practically  escaped  taxation. 
Instinct  tells  us  that  land  ought  to  be  freed  from  taxation  and  from  price 
as  soon  as  possible,  to  bona-fide  users.  A  suggestion  to  this  end  is  the 
main  purpose  of  this  book. 


UNTAXING  THE  CONSUMER  5 

This  would  result  in  a  rise  in  the  price  of  all  land, 
reducing  the  number  who  would  otherwise  engage 
in  the  growing  of  wheat  and  in  all  probability  re- 
ducing the  number  of  acres  planted,  thus  checking 
production.  The  price  of  grain  would,  therefore, 
have  a  tendency  to  rise.  An  advance  in  the  price 
of  land  would  cause  a  decrease  in  the  number  of 
proprietor  farmers  and  an  increase  in  the  number 
of  tenant  farmers,  resulting  in  higher  interest 
charges  on  the  one  hand,  or  higher  rents  on  the 
other,  and  the  total  of  such  charges  and  rents  paid 
by  them  would,  also,  have  to  be  covered  by  the 
average  price  of  wheat.  In  short,  the  less  the  land 
tax  the  more  the  rent,  and  vice-versa.  Single 
Taxers  intend  that  taxes  shall  be  equal  to  the  full 
rent  value  of  land;  but  rent  value  under  this  sys- 
tem will  cover  the  present  land  tax,  as  well  as 
present  rent.  However,  improvements  on  land 
will  not  be  taxed;  but,  because  unimproved  land 
will  soon  yield  no  taxes,  that  which  is  improved 
shall  as  a  whole  have  to  bear  the  aggregate  amount 
now  assessed  against  improvements,  and  shall  not 
the  consumer  still  be  compelled  to  pay  the  total 
land  tax,  whatever  its  amount  may  be? 

Now,  the  tendency  to  lower  the  price  of  wheat 
by  reason  of  the  lessening  of  land  taxes  and  the 
counter  tendency  to  raise  the  price  through 
strengthening  land-monopoly  neither  balance  one 
another  nor  do  they  have  a  fixed  relation  to  each 
other.  Therefore,  the  full  effect  on  the  price  of 
wheat,  due  to  the  lightening  of  land  taxes,  would 
not  be  ascertainable  without  records  based  on 
wide  experience  and  the  most  extensive  investi- 
gation. 

Suppose  that,  instead  of  reducing  the  tax  on 
agricultural  land   it    were  doubled,   as  suggested 


6  UNTAXING  THE  CONSUMER 

before.  In  such  case  the  returns  for  wheat  to  the 
grower  would  eventually  have  to  cover  this  in- 
crease; but,  on  the  other  hand,  such  an  advance 
in  taxes  would  weaken  land  monopoly,  lowering 
farm  rent  and  cheapening  farm  land,  thus  render- 
ing it  more  available  for  use.  If  his  land  were 
mortgaged,  the  wheat  farmer  would  have  to  pay 
less  interest  on  his  land  per  bushel  of  wheat  pro- 
duced; because  the  mortgage  would  amount  to 
less  per  acre.  On  the  other  hand,  if  his  farm  were 
not  mortgaged,  the  charges  on  capital  invested 
would  be  less  on  account  of  the  lower  price  of 
land.  More  people  naturally  could  and  would  try 
to  make  a  living  on  raising  wheat,  and  production 
would  increase  relatively  faster  than  population. 
The  saving  to  the  farmers  in  interest  and  rent  and 
the  increase  in  production  would  then  tend  to  re- 
duce the  price. 

Of  course,  the  problem  of  determining  all  the 
indirect  effects  that  land  taxes  have  on  prices  paid 
by  the  consumer  for  the  products  he  uses  is  more 
complex  than  here  outlined,  and  many  other 
questions  affecting  price  enter  and  will  continue 
to  enter  it  until  our  economic  system  becomes 
more  socialized.  It  seems  quite  plain,  however, 
that  an  increase  in  the  tax  on  wheat  land  has  a 
tendency  to  raise  the  price  of  wheat  and  that  a 
weakening  of  land  monopoly,  due  to  this  increase 
in  taxes  or  to  any  other  cause,  contributes  to  lower 
the  price.  But  in  this  case,  as  in  the  preceding 
one,  the  forces  that  tend  to  lower  the  price  and  the 
opposed  forces  which  tend  to  raise  it  do  not  offset 
one  another,  nor  do  they  bear  a  known  relation  to 
one  another;  so  their  net  effect  on  the  price  of 
wheat  cannot  be  estimated  at  the  present  time. 

In  speaking  of  the  rise  and  fall  in  the  price  of 


UNTAXING  THE  CONSUMER  7 

any  commodity  at  any  particular  time,  we  ought 
to  consider  changes  in  price  in  relation  to  the 
average  wages  prevailing  at  that  time;  but  this 
would  be  going  farther  than  the  purpose  of  the 
present  paper  demands. 

One  aim  of  this  article  is  to  ascertain  whether 
the  tax  on  land  in  general,  irrespective  of  any 
economic  effect  it  may  have,  is  ultimately  trans- 
ferred to  the  consumer  through  the  prices  of  ma- 
terials derived  from  land.  In  other  words,  what 
we  are  just  now  trying  to  determine  is  who  pays 
the  land  taxes,  not  how  difficult  or  how  easy  it 
may  be  for  him  to  pay  them.  Perhaps  the  follow- 
ing illustration  will  aid  better  in  revealing  the 
facts : 

Baker  and  Grocer  Finance  the  Tax. 

As  explained  before,  the  price  paid  for  wheat 
by  the  miller  must  cover  the  taxes  paid  by  the 
owner  of  the  wheat  farm.  At  the  time  the  miller 
sells  flour  to  the  grocer  and  the  baker  he  demands 
a  sum  that  will  cover  the  cost  of  wheat  charged 
him  by  the  farmer,  which  cost,  as  just  explained, 
includes  all  taxes  on  the  wheat  land;  but  his  price 
also  covers  the  tax  he  paid  on  the  industrial  site 
on  which  his  mill  stands. 

The  grocer  and  the  baker,  therefore,  each  in- 
directly pays  such  proportion  of  the  farm  taxes  in 
question  as  will  correspond  with  the  quantity  of 
wheat  used  to  make  their  flour,  and  likewise  such 
proportion  of  the  taxes  on  the  mill  site  as  tin- 
quantity  of  their  flour  respectively  bears  to  th< 
total  output  of  the  mill. 

Tax  Finally  Reaches  Consumer. 

When  the  grocer  sells  flour  and  I  ho  linker  so  Us 
baked  articles  at  prices  including  their  purchase 


8  UNTAXING  THE  CONSUMER 

price  of  flour,  they  are  reimbursed  by  the  buyer — 
the  consumer — of  flour  or  of  baked  goods  in  an 
amount  to  cover  taxes  on  wheat  farm,  mill  site, 
and  the  city  lots  on  which  are  located  the  grocery 
and  bakery. 

It  can  thus  be  asserted  that,  in  the  course  of  its 
travels,  the  tax  on  all  the  land  involved  reaches 
the  individual  consumer  in  some  indefinite  relation 
to  the  quantity  or  value  of  materials  purchased 
by  him. 

To  illustrate  in  still  another  way,  let  us  suppose 
that,  through  new  methods  of  fertilization,  culti- 
vation and  harvesting,  an  average  acre  of  land 
could  be  made  to  yield  normally  one  hundred 
bushels  of  wheat,  and  that  the  grain  could  be  de- 
livered to  the  local  elevator  at  a  cost  to  the  farmer 
not  exceeding  twenty-five  cents  per  bushel.  The 
result  would  be  that  the  price  of  wheat  to  the  con- 
sumer would  in  all  probability  soon  drop  below 
fifty  cents  per  bushel  at  the  elevator.  Suppose, 
on  the  other  hand,  that  by  reason  of  an  uncon- 
trollable, continued  and  world  wide  blight,  wheat 
and  related  grain  were  on  an  average  to  cost  the 
farmer  three  dollars  a  bushel  at  the  elevator;  then, 
of  course,  the  average  market  price  of  wheat  at 
that  point  would  have  to  be  more  than  three  dol- 
lars. If,  under  such  conditions  the  price  were  by 
artificial  means  kept  continuously  below  that 
figure,  the  grain  grower  would  have  to  turn  his 
efforts  to  other  crops,  or  he  would  finally  lose  his 
property,  compelling  the  country  at  large  either 
to  raise  grain  as  a  public  enterpise  or  to  subsidize 
the  grower. 

Direct  Tax  on  Articles  of  Consumption. 

If  a  straight  ten  cent  tax  were  levied  on  each 
hundred  weight  of  wheat,  the  tax  would  be  shifted 


UNTAXING  THE  CONSUMER  9 

onto  the  consumer  in  a  relatively  more  direct,  con- 
stant  and  uniform  manner.  This  would  constitute 
a  direct  tax  on  each  article  of  consumption  con- 
taining a  wheat  product;  but  in  the  long  run  the 
result  would  be  the  same  as  if  a  corresponding 
amount  were  added  to  the  regular  tax  on  the  wheat 
land. 

Every  Land  Tax  Affects  the  Consumer. 

The  argument  used  to  demonstrate  that  the 
consumer  of  wheat  bears  the  taxes  on  wheat  land 
can  be  applied  with  equal  force  to  show  that  the 
consumer  of  raw  fruit  bears  the  taxes  on  orchard 
land,  and  the  grocer's  lot;  of  canned  fruit,  the 
taxes  on  orchard  land,  cannery  site  and  mercantile 
sites;  of  cotton  goods,  those  on  cotton  fields,  mill 
and  warehouse  and  mercantile  sites;  and  so  on, 
with  every  article  of  consumption. 

The  foregoing  carried  to  a  conclusion  would 
show  that  the  consumers,  as  such,  pay  all  the  taxes 
on  all  the  land,  each  in  some  indeterminable  pro- 
portion to  the  articles  of  consumption  purchased 
by  him. 

Under  a  system  that  raises  funds  through  tax- 
ing land  exclusively,  as  proposed  by  advocates  of 
Single  Tax,  the  indirect  taxes  thus  paid  by  the 
consumers  in  this  country,  in  lieu  of  all  present 
taxes,  duties  and  licenses,  would  soon  amount  to 
more  than  five  billion  dollars  annually — an  amount 
so  large  as  to  require  distribution  according  to  the 
most  equitable  plan  that  man  could  devise. 

Land  Tax  Inequitable. 

Two  Families: — An  average  family  of  the  class 
having  an  income  of  $1,000.00  a  year  may  be  able 
to  save,  say  $200.00  annually  through  economiz- 
ing for  the  "rainy  day";  an  average  family  of  tli«- 


10  UNTAXING  THE  CONSUMER 

class  having  an  income  of  five  thousand  dollars 
per  year,  after  spending  twenty-five  hundred  dol- 
lars, can  much  more  readily  save  two  thousand 
five  hundred  dollars  annually  for  its  day  of  re- 
verses. Using  the  word  consume  in  its  broadest 
sense,  the  former  household  with  eight  hundred 
dollars  to  spend  for  current  expenses  consumes  in 
money's  worth  slightly  less  than  one-third  as  much 
as  the  more  fortunate  family.  Since  land  tax  is 
covered  by  the  price  of  land-products,  or  articles 
of  consumption,  it  can  be  said  (without  trying  to 
be  too  exact)  that  the  land-tax  thus  indirectly 
paid  by  the  former  family  would  amount  to  about 
one-third  of  that  paid  by  the  latter  who  are  in  a 
position  to  save  easily  over  twelve  times  as  much. 

Uneven  in  Application. 

On  account  of  innumerable  conditions  that  af- 
fect prices,  there  are  many  instances  when  the  tax 
on  land  is  shifted  onto  the  consumer  only  in  part, 
and  in  certain  cases  he  is  required  to  bear  none  at 
all,  while  in  other  instances  it  is  loaded  onto  him 
with  heavy  increase. 

Seeking  Further  Knowledge. 

Now,  if  all  taxes  were  levied  exclusively  on  used 
land,  and  if,  at  the  same  time,  unoccupied  land 
were  to  revert  to  the  public  and  no  longer  be  sub- 
ject to  taxation,  we  should,  as  the  writer  under- 
stands it,  be  under  the  Single  Tax  System,  and, 
if  the  arguments  herein  be  correct,  the  consumer, 
as  such,  would  indirectly  pay  practically  all  of  the 
taxes  collected  by  the  public;  so  that  taxation,  at 
least  when  considered  without  regard  to  any 
special  modifying,  economic  effects  that  any  cert- 
tain  plan  of  assessment  may  have  on  the  social 


UNTAXING   THE  CONSUMER        11 

organism,  might  be  still  more  inequitably  appor- 
tioned than  it  is  now. 

Before  determining  upon  the  best  method  of 
taxation,  however,  we  shall  have  to  decide  whether 
any  system  of  taxation  whatever  should  be  used 
primarily  for  purposes  of  correcting  faulty  social 
and  economic  conditions;  whether  it  should  be 
employed  with  the  single  view  of  distributing  such 
tax  burden  as  may  be  provided  by  law  for  purely 
governmental  purposes  as  justly  and  equitably  as 
possible,  depending  altogether  on  direct  methods 
of  correcting  these  faulty  conditions,  or  whether 
it  should  compromise  between  correcting  such 
social  and  economic  wrongs  and  levying  taxes  for 
governmental  purposes  equitably  and  justly.  Be- 
fore making  a  decision  we  should  also  take  into 
account  the  disturbing  effect  that  any  radical 
change  in  the  tax  assessment  may  have  on  our 
economic  life,  so  that  we  may  plan  upon  a  system 
of  taxation  in  such  a  way  that  its  introduction  will 
not  cause  temporarily  disastrous  economic  results. 
Furthermore,  unless  our  study  reveals  the  main 
principles  on  which  taxation  should  be  based,  our 
conclusion  will  be  of  doubtful  value. 

At  heart  we  all  want  the  best  possible  solution 
of  the  tax  problem;  but,  before  we  can  solve  it 
logically  and  satisfactorily,  we  must  go  deeper  into 
the  question  as  a  whole. 


THE  OTHER  SIDE  OF  THE  SINGLE   TAX 

QUESTION  AND   PROBLEMS 

CONNECTED  WITH  IT. 

If  the  foregoing  article  is  logical,  it  is  clear  that 
tax  on  land  is  not  a  fair  method  of  taxation,  unless 
it  be  just  that  the  actual  or  ultimate  consumer  pay 
all  the  expenses  of  conducting  a  nation's  affairs  in 
proportion  to  what  he  consumes  and  irrespective 
of  what  or  how  much  he  produces  or  what  share 
of  the  world's  goods  may  fall  to  his  lot. 

Tax  System  Result  of  Cupidity. 

Our  existing  land  tax  system  is  the  price  of 
human  cupidity  and  of  business  incapacity  on  the 
part  of  the  public.  The  blame,  if  any,  for  its 
existence  is  probably  on  every  man,  both  living 
and  dead,  in  proportion  as  he  is  or  has  been  a  tax 
hater  or  has  been  part  of  a  community  incapable 
of  meeting  weighty  economic  problems.  Had  all 
men  been  scrupulously  honest  and  public-spirited, 
and  had  each  insisted  on  paying  his  full  share  of 
taxes,  whatever  their  nature,  in  order  that  no  one 
else  might  perchance  pay  any  part  of  them  for 
him,  an  equitable  system  of  taxation  would  have 
been  evolved  long  ago,  and  I  believe  it  would  not 
for  so  long  a  time  have  been  a  system  covering 
land.  The  desire  to  be  fair  would  have  centered 
human  thought  on  ways  and  means  to  discover  a 
just  form  of  taxation  and  to  create  conditions  that 
would  make  fair  taxation  possible.  Such  senti- 
ments seem,  however,  to  be  idle  dreams,  except 
insofar  as  they  point  the  way  toward  a  higher 
moral  state  far  in  the  future. 


UNTAXING  THE  CONSUMER         13 

Causes  Contributing  to  Our  Land  Tax. 

Our  present  land  problem  and  system  of  land 
taxation  grew  in  part  out  of: 

First:  Fear  of  loss,  resulting  in  extreme  caution 
in  the  selection  of  permanent  investments.  Vacant 
land  was  considered  the  safest  investment  that 
could  be  made,  and  this  was  true  in  a  measure,  so 
long  as  land  taxes  were  low.  Because  of  this  belief 
vacant  land  was  freely  sought  for  investment  pur- 
poses, making  some  kind  of  land  tax  necessary 
until  a  more  just  type  of  ownership  should  be 
adopted. 

Second:  Speculative  tendency.  Much  vacant 
land  had  a  gambling  chance  of  increasing  in  selling 
value  beyond  its  original  price,  plus  the  cost  of 
holding.  Buying  land  was  like  acquiring  a  ticket 
in  a  lottery,  issuing  but  one  ticket,  the  price  of 
which  equaled  that  of  a  certain  known  piece  of 
land.  The  annual  taxes  and  other  costs  of  carry- 
ing the  property  might  be  said  to  have  represented 
a  sort  of  fee  to  keep  the  ticket  (representing  the 
land  title)  valid  until  the  drawing  date  of  the 
lottery,  which  would  correspond  to  the  date  of 
the  sale  of  the  property.  On  this  date  two  cards 
would  be  placed  in  the  lottery,  one  drawing  an 
amount  larger  than  the  cost  of  the  ticket  plus 
the  annual  fees  referred  to,  and  the  other  drawing 
a  smaller  amount.  The  card  calling  for  the  larger 
figure  would  represent  a  profitable  sale  of  the 
land  and  the  other  card  would  stand  for  a  losing 
sale. 

Now,  this  annual  tax  and  other  costs  of  holding 
had  to  be  relatively  small  or  the  lottery  feature 
of  the  land  purchase  would  have  been  80  counter- 
acted as  to  have  spoiled  the  government's  lottery 


14  UNTAXING  THE  CONSUMER 

game  for  raising  public  funds,  and  the  public  in- 
come would  thus  have  become  more  difficult  to 
collect.  This,  too,  was  the  cause  of  much  private 
ownership  in  vacant  land  and  contributed  a  great 
deal  toward  our  present  land  and  tax  problems. 

Third:  Tax  dodging,  arising  from  the  nearly 
universal  tendency  to  resist  or  avoid  in  whole  or 
in  part  the  payment  of  legally  assessed  taxes  of 
any  kind,  no  matter  how  fairly  apportioned.  Self- 
fish  resistance  to  taxation  was  one  of  the  prime 
causes  for  taxing  land  in  this  country  and  for 
granting  proprietorship  in  it.  Land  had  to  be 
taxed,  because  taxes  on  other  property  could  in 
the  past  be  evaded  too  easily,  and  proprietorship 
in  land  had  to  be  granted  in  order  to  levy  the  taxes 
upon  it — especially  so  if  it  was  not  intended  for 
regular  use. 

Fourth:  Official  incapacity.  Land  assessment 
was  one  of  the  simpler  ways  of  raising  public 
moneys.  Real  estate,  was  always  one  of  the  rela- 
tively easy  things  to  assess,  because:  a,  it  could 
not  be  concealed  from  the  assessor;  b,  the  specula- 
tor in  vacant  land  was  not  as  likely  as  others  to 
complain  of  his  taxes  if  they  left  him  more  than 
an  even  chance  to  win  out;  c,  taxes  paid  by  the 
speculator  lighten  taxes  on  the  land  of  others  and 
thus  in  some  degree  lessen  complaint  from  the 
non-speculator. 

In  the  past  taxes  were  largely  regarded  as  a 
graft  and  office  holders  handling  public  moneys 
were  almost  indiscriminately  called  grafters.  This 
was  so  partly  because  some  tax  payers  wanted  an 
excuse  for  dodging  taxes  and  partly  because  there 
was  sometimes  truth  in  the  assertion.  Although 
many  realized  that  an  increase  in  land  taxes  would 
have  lowered  the  future  purchase  price  of  land 


UNTAXING  THE  CONSUMER         15 

and  saved  the  user  of  such  land  considerable  capi- 
tal and  interest,  it  was  nevertheless  simply  second 
nature  for  people  to  hate  taxes. 

The  effects  of  taxation  on  the  consumer  were 
ignored  entirely,  for  the  reason  that  the  consumer, 
though  most  unfairly  treated,  did  not  understand 
the  problem.  Had  he  understood  it,  he  could  not 
have  helped  himself;  for  he  had  but  little  political 
force. 

Generally  speaking,  public  officials  can  be  de- 
pended upon  to  adopt  the  easiest  method  of  doing 
things,  especially  if  all  other  ways  are  appreciably 
more  difficult.  In  fact,  our  government  is  only 
now  learning  business  details  and  principles  and 
acquiring  a  capacity  to  do  business  of  a  kind  and 
quality  that  will  enable  it  to  levy  and  collect  suc- 
cessfully other  than  our  simple  forms  of  property 
and  commodity  taxes. 

Fifth:  The  necessity  in  the  past  of  giving  titles 
in  fee  simple,  in  order  to  warrant  the  making  of 
improvements.  Once  the  land  was  held  under 
such  titles  taxes  had  to  be  levied  on  it  or  there 
would  have  been  no  obstacle  whatever  to  a  more 
limited  number  of  men  owning  it  all.  The  appli- 
cation of  other  methods  of  fully  securing  an  owner 
in  the  continued  occupancy  of  improved  land,  for 
instance  "adequate  use",  was  heretofore  beyond 
the  capacity  of  public  business.  Yet,  had  all  men 
been  honest  and  well  informed  regarding  tax  mat- 
ters, they  would  probably  have  been  conscien- 
tious in  the  use  and  proprietorship  of  land  and 
the  will  to  solve  the  land  question  would  have 
developed  the  necessary  business  capacity  to 
do  so. 


16  UNTAXING  THE  CONSUMER 

MONOPOLY. 

Monopoly  is  closely  related  to  tax  and  land 
questions :  first,  because  it  usually  exacts  from  the 
consumer  what  may  be  called  private  commodity 
taxes,  at  the  same  time  shifting  its  own  public 
taxes  onto  him ;  second,  because,  by  means  of  levy- 
ing these  "private  taxes",  it  can  both  directly  and 
indirectly  take  from  uncombined  producers  every- 
thing that  their  land  yields  them  beyond  a  mere 
living,  whether  the  property  be  taxed  or  free,  un- 
less the  monopoly  be  subjected  to  strict  price 
regulation  by  public  authorities. 

Monopoly  in  Natural  Resources. 

In  considering  monopoly  in  natural  resources 
let  us  picture  a  concrete  example. 

A  certain  iron  corporation  owns  and  operates  a 
very  large  iron  deposit  which,  irrespective  of  im- 
provements, is  taxed  about  $100,000  annually. 
In  the  past  the  fact  that  the  corporation  owned 
this  deposit  was  largely  why  it  could  co-operate 
with  similar  institutions  owning  like  deposits  in 
partially  controlling  the  output  of  raw  iron  and 
consequently  in  fixing  an  arbitary  price  on  man- 
ufactured iron  at  figures  that  yielded  an  annual 
"excess  profit",  say,  of  one  million  dollars  over 
and  above  a  fair  profit.  Today  the  human  ele- 
ment in  great  corporations  of  this  sort,  and  their 
intimate  connection  with  nation-wide  financial 
interests,  have  much  mor^  to  do  with  making 
monopoly  strong. 

Monopoly  in  Brains  and  Capital. 

The  capacity  for  organizing  and  operating  great 
business  combinations  has  developed  rapidly  with- 
in the  past  generation.    Its  growth  was  doubtless 


UNTAXING  THE  CONSUMER  17 

aided  by  the  opportunity  given  trusts  through  our 
laws  to  monopolize  natural  resources  Now,  how- 
ever, the  ability  to  promote  and  operate  large  com- 
binations is  no  longer  vitally  dependent  upon  such 
aid  and  their  business  conduct,  therefore,  should 
itself  be  subjected  to  special  and  direct  corrective 
legislation. 

Changing  conditions  have  altered  th*  structure 
or  organism  of  trusts  or  monopolies.  In  earlier 
days  they  formed  a  close  organization  embracing 
a  relatively  limited  number  of  owners.  In  fact, 
they  were  really  incomplete  and  embryonic,  work- 
ing under  a  relatively  undeveloped  "system  of 
business"  that  did  not  lend  itself  to  the  operation 
of  business  combination  of  such  dimensions  as  we 
see  today.  They  were  still  engaged  occasionally 
in  competitive  trade  wars,  depending  to  a  great 
extent  upon  their  powers  as  relatively  large  buyers 
to  extensively  control  the  raw  material  markets. 
Later  on,  when  the  nature  of  the  materials  per- 
mitted, the  trusts  added  extensive  ownership  in 
the  sources  of  supply  to  their  means  of  monopoliz- 
ing the  raw  materials  used  by  them.  Now  we  have 
the  super-trust  which  is  mainly  an  accumulation 
of  brain  and  capital.  The  available,  especially 
trained  minds  which  are  not  actually  needed  in  the 
conduct  of  the  trusts  are  nevertheless  corralled 
through  retainers'  fees  or  given  nominal  employ- 
ment at  good  salaries,  or  they  are  absorbed  by 
other  means,  so  as  to  monopolize  better  all  the 
mental  energy  that  might  otherwise  promote  ser- 
ious competition  or  embarrassment  to  these  mo- 
nopolies. This  condition  was  more  apparent  in 
the  past;  but  it  is  quite  as  real  as  ever,  though 
relatively  fewer  "superfluous  brains"  have  to  be 
employed  than  formerly,  as  business  combinations 


18        UNTAXING  THE  CONSUMER 

are  now  more  powerful  and  less  vulnerable  to  com- 
petition. 

Unused  capital,  that  was  formerly  so  restless 
for  investment  outside  of  these  trusts,  is  now  and 
has  for  some  time  been  given  a  freer  and  more 
liberal  opportunity  to  participate.  Such  capital, 
begging  for  investment,  made  the  watering  of 
stocks  very  easy;  indeed,  much  more  capital  was 
accommodated  through  watered  stock  than  would 
otherwise  have  been  possible.  This  has  conse- 
quently increased  the  number  of  stockholders  and 
they,  as  is  natural,  individually  and  collectively 
have  helped  as  they  could  to  uphold  the  acts  of 
their  respective  trusts,  and  trusts  in  general,  in 
maintaining  increased  prices  necessary  to  meet 
unreasonable  expenses  and  to  pay  dividends  on 
inflated  stock.  All  of  this  was  and  in  large  measure 
still  is  a  natural  and  inevitable  outcome,  but  it  will 
gradually  vanish  as  communities  learn  scientific 
public  control  and  collective  industrial  action. 

The  Final  Control. 

However,  the  strongest  forces  creating  and 
maintaining  great  monopolies  are  the  powerful 
financial  aggregations  which  supply  the  money  for 
operating  them.  To  no  small  extent  they  divide 
the  important  branches  in  the  field  of  industry  be- 
tween themselves  on  a  friendly  basis,  eliminating 
all  competition.  The  interlocking  of  directors  and 
stockholders  makes  this  all  the  more  possible.  The 
powers  that  control  the  money  supply  of  industry, 
it  seems,  are  in  position  to  dictate  just  what  may 
and  may  not  be  done  in  the  larger  private  business 
activities.  Through  this  financial  control  the 
greatest  industries  are  to  a  marked  degree  co-ordi- 
nated into  one  superimposed,  nation-wide,  indus- 
trial organism  that  can,  it  seems,  escape  the  effects 


UNTAXING  THE  CONSUMER         19 

of  any  tax — at  least  until  the  prices  of  their  com- 
modities are  efficiently  regulated  by  the  Govern- 
ment, which  can  be  done  only  when  our  great 
money  combination  loses  all  undue  influence  at 
Washington.  Such  influence  is  in  part  maintained 
through  the  willingness  of  a  large  portion  of  the 
leading  press  to  serve  the  combine  by  creating 
public  opinion  favorable  to  it,  and  through  the 
lesser  press  that  follows  in  its  wake  through  lack 
of  courage,  knowledge  or  power  to  be  independent. 
The  "great  trust"  should  not  be  destroyed, 
however;  but  studied,  regulated  and  gradually 
absorbed,  in  part  at  least,  by  state  or  nation. 

Raw  Material  Corporations. 

Under  absolute  Single  Tax,  special  corpora- 
tions, backed  and  guided  under  cover  by  the  great, 
central  group  of  financial  interests,  would  prob- 
ably be  organized  to  supply  raw  materials  to  all 
manufacturers  alike  and  would  have  to  pay  a  large 
part  of  the  land  taxes  of  industry.  However,  the 
primary  purpose  of  these  corporations  would  be 
to  supply  with  whatever  materials  they  need  the 
manufacturing  trusts  most  closely  connected  with 
the  financial  interests.  The  materials  here  referred 
to  would,  of  course,  not  be  absolutely  "raw",  but 
would  represent  the  minimum  of  human  labor 
necessary  to  make  them  available  for  transposi- 
tion and  for  transformation  into  usable  things.  If 
the  price  of  these  materials  were  kept  down,  the 
profits  enjoyed  by  the  corporations  producing 
them  would  Ik*  light,  this  making  I  Ik-  rental  value 
of  their  land  low  and,  under  Single  Tax,  resulting 
in  a  land  tax  correspondingly  low.     If  the  prices 

and  profits  exacted  were  high,  it  would  follow  that 
the  land  tax  would  also  be  liigh. 

In  the  absence  of  government   price  regulation 


20  UNTAXING  THE  CONSUMER 

we  should  probably  find  that  the  financial  interests 
would  provide  fairly  low  prices  for  the  materials 
produced  by  "raw  material  corporations",  in  order 
that  the  cost  of  manufacture  to  the  trusts  using 
such  materials  might  be  kept  down  and  that,  with- 
out increasing  prices,  trust  profits  might  remain 
approximately  as  before.  In  other  words,  any  re- 
duction in  gains  suffered  through  moderation  of 
prices  by  these  "raw  material  corporations",  would 
be  overcome  through  the  maintenance  of  usual 
profits  accruing  to  the  trusts.  This  plan,  as  is 
evident,  would  keep  down  the  land  tax  and  would 
not  materially  affect  the  total  net  profits  of  the 
trusts  or  the  central  financial  organizations  that 
practically  govern  them,  and  to  a  greater  or  lesser 
lesser  extent  control  indirectly  all  other  industrial 
activity. 

Avoiding  High  Land  Taxes. 

The  reason  for  thus  reducing  the  land  tax  would 
not  be  so  much  to  avoid  payment  of  extra  taxes 
as  to  escape  the  necessity  of  making  such  increases 
in  the  selling  prices  as  might  be  required  to  main- 
tain the  original  rate  of  profit;  for  such  a  rise  in 
prices  might  curtail  the  demand  below  the  capac- 
ity of  the  trusts  to  produce,  and  in  that  way  pre- 
vent the  maximum  of  gains  being  made.  Although 
manufacturing  and  financial  concerns  whose  prices 
and  services  are  not  legally  regulated  can  usually 
reimburse  themselves  for  increase  in  any  kind  of 
taxes  by  raising  prices,  they  gradually — almost 
instinctively — shape  conditions  to  bring  about 
some  plan  to  avoid  or  reduce  any  heavy  increase 
in  land  tax  on  raw  materials. 

I  can  readily  see  that  this  move  of  the  trusts  to 
reduce  the  land  tax  to  a  minimum  could  be  frus- 


UNTAXING  THE  CONSUMER         21 

trated  by  the  government  authorities  arbitrarily 
raising  it  beyond  what  the  consumer  can  pay;  but 
the  consumer  would  have  to  meet  the  burden  of 
the  advance,  up  to  the  limit  of  what  "the  traffic 
will  bear",  unless  prices  were  regulated  so  thor- 
oughly as  to  require  administrative  machinery  as 
complicated  as  would  be  needed  for  the  public 
operation  of  the  trusts  themselves. 

Of  course,  the  availability  of  raw  materials  to 
all  manufacturers  alike  (which  would  result  from 
the  operation  of  these  raw  material  corporations) 
might  foster  serious  competition  if  it  were  not  for 
the  power  of  established  finance  and  for  the  brains 
of  "monopoly  experts".  This  is  demonstrated  by 
the  Standard  Oil  Company.  In  spite  of  the  fact 
that  this  company  controls  only  a  part  of  the 
country's  petroleum  deposits,  it  succeeds  in  rather 
arbitrarily  fixing  its  own  selling  prices  and  in  in- 
ducing or  compelling  other  oil  concerns  to  adhere 
to  them  strictly. 

The  recently  exposed  business  activities  of  the 
great  American  meat  trust  or  combination  also 
illustrates  strongly  and  completely  the  monpolistic 
possibilities  of  combined  brain  and  capital.  It  is 
only  necessary  to  quote  the  following  from  the 
report  of  the  Federal  Commission  that  recently 
(1918)  conducted  the  investigation  of  the  affairs 
of  this  great  combination: 

"The  purposes  of  this  combination  which  for 
more  than  a  generation  has  defied  the  law  and  es- 
caped adequate  punishment  are  sufficiently  clear 
from  the  history  of  the  conspiracy  and  from  the 
numerous  documents  already  presented,  namely :- 

"To  monopolize  and  divide  among  the  several 
interests  the  distribution  of  the  food  supply,  n<>l 
only   of    the    United  States,  but  of  all  countries 


22         UNTAXING  THE  CONSUMER 

which  produce  a  food  surplus,  and  as  a  result  of 
this  monopolistic  position, 

"To  extort  excessive  profits  from  the  people  not 
only  of  the  United  States,  but  of  a  large  part  of 
the  world. 

"To  secure  these  ends  the  combination  and  its 
constituent  members  employ  practically  every 
tried  method  of  unfair  combination  known  to  this 
commission  and  invent  certain  new  and  efficient 
methods  to  crush  weaker  concerns." 

Destructive  Competition  Versus  Trusts. 

It  is  a  question  whether  the  public  suffers  more 
from  arbitrary  price-fixing  by  the  trusts  today 
than  it  did  from  the  results  of  destructive  compe- 
tition between  them,  such  as  was  common  before 
they  were  so  fully  developed.  Destructive  com- 
petition was  exceedingly  wasteful  and  in  the  long 
run,  of  course,  the  public  had  to  pay  prices  that 
would  cover  this  waste.  Now,  however,  the  public 
should  protect  itself  through  government  action 
against  monopoly  prices  whenever  they  are  too 
high. 

Great  corporations  either  consolidate  and  be- 
come one  organization,  or  voluntarily  or  by  agree- 
ment act  in  friendly  unison,  which  is  almost  the 
same  thing;  otherwise  they  would  again  engage  in 
destructive  competition.  Therefore,  even  if  a 
heavy  land  tax  on  natural  resources  could  be  per- 
manently exacted  from  these  large  business  enter- 
prises and  if  this  did  result  in  starting  competition 
between  them  by  the  freeing  of  raw  materials,  as 
is  supposed  to  be  the  case,  the  public  would  gain 
little  and  possibly  lose  economically  and,  as  al- 
ready shown,  the  land  tax  itself  would  in  the 
course  of  time  always  appear  in  the  prices  of  com- 
modities used  by  the  consumer. 


UNTAXING  THE  CONSUMER         23 

Consumer  Pays  All  Expenses  and  Profits. 

In  considering  the  iron  company  above  cited: 
all  profit,  that  is  to  say  the  "excess  profit"  plus 
the  "fair  profit",  accrues  to  the  corporation  free 
and  clear  above  expenses  of  operation.  These  in- 
clude the  $100,000  paid  as  taxes  on  the  iron  de- 
posit. In  paying  for  the  iron  that  he  uses  the  con- 
sumer, therefore,  has  indirectly  and  in  the  course 
of  time  to  repay  to  the  iron  corporation  the 
SI 00,000  that  is  annually  expended  for  taxes  on 
the  ore  deposit.  He  must  also  furnish  to  the 
corporation  the  SI, 000,000  constituting  "excess 
profits",  as  well  as  normal  profit.  Of  course,  be- 
sides furnishing  the  funds  necessary  to  cover  these 
amounts,  the  consumer,  through  his  purchases  of 
iron,  must  also  reimburse  the  corporation  for  all 
the  other  expenses  of  conducting  its  business. 
However,  if  the  corporation's  price  of  iron  pro- 
ducts were  always  determined  by  the  limit  of 
what  the  consumer  could  pay,  it  would  vary  little 
whether  the  tax  on  the  ore  deposit  were  lowered 
to  a  nominal  figure  or  raised  to,  say,  $500,000. 
In  such  instances  high  taxes  would  reduce  the 
corporation's  profits  correspondingly,  although 
the  prices  paid  by  the  consumer  would  remain 
as  before. 

With  efficient  regulation  this  case  would  be 
different  for  both  the  corporation  and  the  con- 
sumer, yet  the  prices  would  always  have  to 
cover  the  land  tax. 

The  "Actual  Consumer". 

Who  is  the  consumer  of  iron?  The  man  that 
occupies  his  own  or  a  rented  dwelling  in  the  con- 
struction of  which  nails,  pipes,  screens,  furnace; 
locks,  hinges  and  other  articles  of  iron  are  used. 


24        UNTAXING  THE  CONSUMER 

the  patient  whose  doctor  pays  office  rent  in  a 
building  constructed  partly  of  structural  and  other 
iron;  the  individual  who  personally  uses  any 
product  that  has  been  transported  by  rail.  The 
amount  of  freight  charged  on  such  an  article  enters 
into  its  selling  price,  the  charge  itself  covering  cost 
of  maintaining  rails,  rolling  stock  and  other  iron 
of  the  railway's  equipment.  In  this  sense  every 
civilized  man  is  a  consumer  of  iron  and  an  indirect 
payer  of  taxes  levied  on  land  containing  iron  de- 
posits. Just  as  he  is  a  consumer  of  iron,  so  is  he 
a  consumer  of  every  other  elemental  product  of 
industry. 

For  Consumer's  Self-protection. 

Where  a  productive  activity  is  suitable  for 
public  ownership  and  operation,  the  consumer  can 
through  the  acquisition  and  efficient  operation  of 
such  activity  by  the  public  be  protected  against 
excessive  profits  arising  out  of  monopoly.  In  such 
case,  however,  the  public  must  have  developed  a 
sufficiently  high  social  character  to  undertake  the 
task  and  must  possess  the  will  to  make  it  succeed. 
The  only  other  way  to  protect  himself,  although 
not  so  thorough,  is  through  complete  regulation 
of  the  industry  by  the  Government,~this  includes 
government  price  regulation.  To  be  truly  effective 
the  latter  must  be  so  exact  and  strict  as  to  border 
upon  public  ownership. 

Public  ownership  is  the  ultimate  goal  in  price 
regulation.  In  fact,  it  is  a  step  beyond.  In  com- 
plete government  regulation  of  monopoly,  price 
regulation  is  always  an  essential  thing.  In  these 
times  of  business  consolidation  no  land  or  other 
economic  reform  can  be  worthily  effective  without 
the  official  price-fixing  of  important  commodities. 


UNTAXING  THE  CONSUMER         25 

Fair  Price  Regulation  Inadequate 
In  Emergencies. 

However,  when  there  is  a  shortage  in  any  par- 
ticular necessity,  price  regulation  based  on  a 
reasonable  profit  over  cost  of  production  alone, 
will  not  properly  apportion  supplies  as  between 
consumers.  At  prices  so  based  those  consumers 
having  a  financial  reserve  will  anticipate  their 
wants  and  accumulate  supplies  of  such  a  necessity 
only  to  increase  shortage  for  those  who  have  less 
money  and  who  must  make  their  purchases  in 
small  quantities  to  meet  their  needs  from  day  to 
day. 

Supply.  Demand  and  Competition 

Poor  Regulators. 

The  Single  Tax  theory  relies  upon  the  effects 
of  "supply  and  demand",  and  also  upon  the  effects 
of  competition,  to  regulate  prices.  Under  such 
conditions  the  hoarding  of  any  article  of  consump- 
tion in  times  when  the  supply  is  limited  results  in 
an  extra  depletion  of  the  market  and  the  price 
increases,  quite  irrespective  of  cost  of  production; 
because  the  dealer  demands  all  he  can  readily 
obtain  for  it.  Indeed,  he  must  ask  more  than 
ordinarily;  for  he  knows  that  in  replenishing  his 
stock  he  himself  will  be  compelled  to  meet  an 
advance  of  unforeseen  magnitude  in  the  market 
priee.  This  is  a  perfectly  natural  economic  devel- 
opment and  results  in  decreased  consumption  and 
increased  production;  but  in  such  cases,  since 
prices  are  left  to  rise  without  any  regulation  by 
pnblie  authority,  they  go  too  high.  During  pe- 
riods of  abnormally  high  prices,  overproduction 
gradually  tak<  a  place.    This  is  usually  followed  by 

Subnormal  r;il< «,  decreased  production  and  tempo- 


20        UNTAXING  THE  CONSUMER 

rarily  increased  consumption  until  supplies  are 
again  depleted.  These  low  rates,  so  far  as  not 
taken  complete  advantage  of  by  the  middleman, 
are  to  the  advantage  of  the  consumer.  On  the 
whole,  however,  this  unreliable,  spontaneous  regu- 
lation, always  resulting  from  the  unrestricted 
action  of  supply,  demand  and  competition,  is 
wasteful  and  is  neither  good  for  the  consumer  nor 
the  producer.  It  tends  to  aggravate  every  eco- 
nomic problem,  including  that  of  land. 

Price  Control  by  Private  Corporations 

of  Important  Manufactured  Products. 

The  foregoing  applies  particularly  to  prices  on 
agricultural  products,  as  agriculture  is  still  poorly 
organized  in  many  lines.  On  the  other  hand  all 
the  principal  manufacturing  industries  are  well 
organized  and  strongly  combined.  Nowadays  the 
latter  rarely  over-supply  a  market  with  their  goods 
and  usually  sell  at  a  super-normal  price,  deter- 
mined solely  by  themselves,  the  consumer  con- 
stantly paying  more  than  is  really  necessary.  But 
it  must  be  admitted  that,  if  it  were  not  for  this 
universal  overcharge,  the  public  would  never  at- 
tempt to  regulate  or  conduct  great  industries;  it 
would,  therefore,  never  learn  self-government 
thoroughly  and  would  never  get  rid  of  being 
assessed  for  private  profit  on  things  that  should 
be  done  or  made  collectively  by  the  people  as  a 
whole.  As  far  as  the  public  allows  combinations 
to  charge  unrestricted  prices  for  their  materials 
it  would  remain  possible  for  the  great  private  in- 
dustries to  absorb  whatever  benefits  would  come 
to  the  consumer  through  a  free  land  policy  or  other 
means. 


UNTAXING  THE  CONSUMER  27 

Competition  Being  Restricted. 

The  better  an  existing  industry  is  organized,  the 
stronger  is  the  community  of  interests  between  the 
units  that  compose  it.  This  increases  the  margin 
of  profit  required  to  induce  competition  to  become 
active,  and  therefore  restricts  the  field  of  competi- 
tion. This  margin  is  becommg  relatively  larger 
and  is  often  taken  full  advantage  of  by  established 
business.  The  consumer  then  is  compelled  to  pay 
it,  except  so  far  as  actual  regulation  by  the  govern- 
ment is  inaugurated. 

Price  Control,  Free  Land  and 
Taxation  Go  Together . 

As  soon  as  practicable  prices  of  important  art- 
icles, during  a  shortage  in  supply,  should  be  deter- 
mined and  controlled  by  law,  in  order  to  keep 
supplies  on  the  market  until  production  is  in- 
creased, and  any  excessive  increase  of  profit  due 
to  continued  advance  in  prices  should  within 
practical  limits  accrue  to  the  public,  preferably 
through  direct  commodity  taxes.  These  latter  are 
usually  paid  by  the  producer  in  the  first  instance; 
however,  they  must  be  finally  borne  by  consumers. 
In  such  cases  the  consumer  cannot  be  protected, 
except  through  a  change  in  policy.  To  give  him 
protection  prices  must  be  kept  normal  by  law  and 
;i  rationing  of  the  articles  introduced,  as  explained 
later. 

In  this  discussion  land  is  considered  practically 
free  when  in  its  natural  slate  it  is  obtainable  at  a 
low  or  nominal  price,  and  a  maximum,  individual, 

tax-free  holding  of  reasonable  size  is  provided  for 
by  law,  only  the  excess  held  above  the  tax-free 
portion  by  corporate  or  indivi  ual  owners  being 
subject  to  taxation.  Willi  land  made  free  in  this 
manner  the  tax  on  the  excess  portion  would  not 


28         UNTAXING  THE  CONSUMER 

appear  in  the  prices  paid  by  the  consumer,  as  the 
larger  part  of  the  production  would  come  from 
tax-free  land  and  this  would  determine  prices  on 
a  tax-free  basis.  Thus  natural  economic  processes 
would,  even  without  government  regulation  of 
prices,  place  permanently  on  the  owner  nearly  all 
of  the  burden  of  the  tax  on  excess  holdings. 

It  seems  quite  certain  that  free  land  and  wise 
government  control  of  prices  are  necessary,  in 
order  that  any  system  of  taxation  whatever  may 
be  made  approximately  just  to  the  individual 
consumer. 

Suppositions. 

If  farm  land  were  free  in  this  way,  production 
in  general  would  doubtless  be  somewhat  greater. 
If  farmers  would  co-operate  to  do  their  own  selling, 
dispensing  with  any  unnecessary  service  of  middle- 
men, and  also  eliminating  waste  in  other  ways;  if 
they  would  then  always  curb  the  tendency  of  pro- 
ducers, once  organized,  to  combine  in  raising 
prices  above  what  is  fair;  if  they  would  never  yield 
to  the  temptation  to  reduce  production  below 
normal  or  withhold  supplies  from  market  for  the 
purpose  of  increasing  prices  above  what  is  right; 
if  they  themselves  would  advance  the  business 
and  profession  of  farming,  and  if  they  would  make 
an  honest  effort  to  meet  any  unusual  demands  for 
their  products — free  agricultural  land  would,  for 
present  purposes,  doubtless  prove  a  satisfactory 
solution  of  the  land  question  so  far  as  agriculture 
is   concerned. 

Since  citizenship  has  not  yet  reached  this  stage 
of  development,  these  things  serve  to  impress  one 
with  the  importance  of  new  land  laws  and  govern- 
ment aid  and  regulation. 


UNTAXING  THE  CONSUMER         29 

Another  Method  of  Apportionment. 

The  remaining  method  of  apportioning  articles 
of  consumption  among  consumers  in  times  of  in- 
sufficiency of  supplies  is  to  maintain  prices  by  law 
on  a  basis  of  cost  and  fair  profit,  and  to  prescribe 
and  enforce  by  law  the  maximum  quantity  each 
consumer  is  entitled  to  purchase  in  a  given  period 
— in  other  words,  to  ration  ourselves.  This  meth- 
od of  regulating  distribution  is  the  most  thorough 
and  equitable  if  efficiently  managed,  and  it  results 
in  no  increase  in  price  for  the  consumer;  but, 
under  our  present  social  organization,  it  is  too 
difficult  to  carry  out,  except  possibly  in  a  crude 
way  under  conditions  of  utmost  stress.  However, 
when  land  is  free  and  fair  selling  prices  for  essential 
products  are  established  by  aid  of  law,  and  rural 
conditions  otherwise  are  made  better,  times  of  in- 
sufficiency of  supplies  will  probably  be  more  rare 
than  now,  because  there  will  be  a  larger  agricul- 
tural population  to  exert  effort  on  increased  pro- 
duction when  the  need  arises.  Generally  speaking, 
the  United  States  are  not  yet  adequately  socialized 
to  adopt  and  carry  out  these  methods  fully;  but 
we  are  at  present  ready  to  extend  government 
price  regulation  to  a  few  more  of  the  most  import- 
ant articles  of  consumption.  With  the  exception 
of  the  rates  on  water,  electric  current,  gas,  freight 
and  storage,  prices  in  times  of  peace  have  been 
determined  largely  by  individuals  financially  in- 
terested in  high  profits;  but,  if  it  is  found  that  the 
Govern  incut's  extension  of  price  regulation  in  war 
times  is  in  harmony  with  the  interests  of  the  ma- 
jority, the  plan  will  probably  be  continued  in  a 
measure  after  the  war  and  be  applied  as  fast  as 
our  more  important  needs  demand. 


30  UNTAXING  THE  CONSUMER 

A  Serious  Result  of  Inflated  Prices. 

The  remarks  just  given  so  far  as  they  relate  to 
the  distribution  of  supplies,  are  confined  mostly 
to  periods  when  stocks  are  deficient.  This  was 
done  because  the  solution  of  the  problem  of  dis- 
tribution is  naturally  more  urgent  in  times  of 
scarcity  of  supplies,  and  problems  of  this  nature 
can  best  be  demonstrated  through  extreme  cases 
involving  such  urgency. 

But  there  is  an  equivalent  to  shortage  of  sup- 
plies that  has  a  similar  effect  on  distribution. 
When  the  price  of  any  article  is  artificially  main- 
tained by  producers  at  a  figure  that  yields  more 
than  a  reasonable  profit,  the  net  result  of  it,  as 
far  as  the  consumer  is  concerned,  is  equivalent  to 
shortage  of  supplies.  Such  price  may  be  deter- 
mined and  maintained  by  mutual  agreement  be- 
tween business  houses,  by  monopoly  or,  in  cases 
of  small  articles,  by  custom.  Although  the  stock 
may  be  plentiful,  the  price  thus  inflated  naturally 
retards  consumption,  just  as  though  there  were  a 
shortage  in  the  market.  The  selling  price  of  any 
article  regulates  consumption  largely.  So  long- 
as  they  are  artificially  inflated,  although  profitable 
to  the  producer,  prices  cannot  stimulate  produc- 
tion for  the  simple  reason  that  they  curtail  con- 
sumption below  what  it  would  have  been  had 
prices  been  left  on  a  reasonable  basis. 

If  for  unusual  causes  the  demand  for  an  article 
selling  at  an  artificially  inflated  price  meets  with 
a  demand  that  overtakes  the  output  of  the  in- 
dustry, one  of  three  things  is  likely  to  take  place — 
the  output  capacity  is  increased  to  meet  the  de- 
mand fully,  or  the  price  is  again  artificially  ad- 
vanced to  keep  the  demand  down  to  the  original 
capacity  of  production,  or  the  ability  to  produce 


UNTAXING  THE  CONSUMER         31 

is  increased  to  a  lesser  extent  and  consumption 
is  held  back  sufficiently  through  a  smaller  raise 
in  the  price,  so  as  to  keep  the  demand  within  the 
ability  of  the  industries  to  supply  the  market. 
But  in  all  three  cases  the  result,  of  course,  is  an 
equivalent  to  shortage  of  supply. 

In  brief,  an  actual  shortage  causes  a  natural 
increase  in  price,  while  artificially  made  high 
prices  result  in  an  equivalent  to  deficiency  in 
supplies. 

The  latter  prices  are  the  ones  that  cause  the 
greater  damage  to  the  public  and  therefore  they 
need  intelligent  regulation  by  the  public  to  an 
even  greater  extent  than  those  involving  a  natural 
shortage. 

A  Hidden  Danger. 

But  there  is  the  danger  that  the  financial  in- 
terests, through  their  power  to  mold  public 
thought,  will  themselves  direct  the  regulation  of 
prices  under  cover  to  their  own  financial  gain. 
There  has  always  been  a  fight  between  the  pro- 
gressive and  reactionary  political  and  economic 
forces,  to  enlist  the  aid  of  the  public  in  regard  to 
legislation.  One  purpose  of  the  former  is  to  make 
possible  a  just  price  regulation  of  the  great  in- 
dustries; of  the  latter,  to  enhance  the  profits  of 
these  industries.  Such  regulation  must  be  fair 
and  scientific  or  it  cannot  last.  However,  before 
it  can  be  applied  scientifically  and  justly  to  any 
industry  the  task  must  be  studied  and  well  learned. 

Government  Price  Control  Does  Not 
Shield  Consumer  From  Land  Taxes. 

As  said  several  times  before,  even  if  the  Govern- 
ment should  fix  prices  on  our  principal  iron  prod- 
ucts and  base  them  on  cost  of  production  and  fair 


32         UNTAXING  THE  CONSUMER 

profit,  the  consumer  would  indirectly  pay  the  an- 
nual tax  of  $100,000  on  the  iron  ore  deposit  above 
mentioned.  For  the  best  interests  of  the  public 
the  wisest  and  most  effective  rate  of  individual  or 
corporate  profit  must  always  be  a  definite  rate 
determined  by  conditions  over  and  above  all 
proper  expenses,  including  taxes.  The  only  way 
to  get  rid  of  the  consumer's  covering  this  tax  is  for 
the  public  to  relieve  the  iron  deposit  from  tax- 
ation; provided  not  only  prices  are  regulated,  but 
that  the  continuity  of  title  to  the  land  containing 
the  deposit  is  also  made  dependent  on  keeping  the 
deposit  at  a  legally  fixed,  minimum,  beneficial  use. 
So  long  as  land  titles  are  not  based  on  an  intelli- 
gently determined  minimum  use,  land  monopoly 
will  exist,  and  some  of  its  effects  are  quite  certain 
to  show  themselves  in  prices  paid  by  the  consumer 
even  under  government  regulation  of  prices.  But, 
if  this  minimum  use  is  enforced  through  the  cruder 
method  of  land  taxation  (whether  Single  Tax  or 
as  it  is  at  present),  the  consumer  must  bear  the 
full,  though  indirect,  assessment.  In  this  regard, 
what  is  said  of  iron  applies  to  all  other  industrial 
and  business  products. 

High  Ability  Required. 

To  carry  out  a  plan  of  land  titles  dependent 
upon  use  of  land,  if  it  is  to  be  honestly,  accurately 
and  efficiently  done,  will  require  public  servants  of 
the  highest  character  and  of  natural  capacity  in 
these  lines, — men  specialized,  also,  through  train- 
ing of  a  degree  and  quality  that  can  be  given  only 
by  our  higher  institutions  of  learning,  and  then 
only  if  these  institutions  will  extend  their  opera- 
tions into  the  field  of  practical  experience,  once 
they  are  equipped  to  do  so. 

Since  the  necessary   knowledge  covering  the 


UNTAXING  THE  CONSUMER         33 

proper  and  adequate  use  of  land  is  as  yet  available 
to  the  public  in  a  few  fields  only,  the  introduction 
of  a  sytem  of  land  titles  based  on  use,  as  herein 
discussed,  would  have  to  be  undertaken  step  by 
step. 

No  Insurmountable  Obstacles. 

Eliminating  excessive  monopolistic  profit  by 
the  methods  suggested  and  at  the  same  time  dis- 
carding the  land  tax  seems  on  first  thought  to  offer 
insurmountable  obstacles;  but  these  difficulties  of 
accomplishment  are  no  greater  than  would  appear 
in  developing  and  carrying  out  a  Single  Tax  system 
alone  if  the  latter  were  done  with  an  earnest  pur- 
pose of  making  it  as  nearly  equitable  as  it  is  pos- 
sible for  a  tax  on  land  to  be.  In  fact,  problems 
much  the  same  in  nature  would  have  to  be  solved 
in  both  cases;  but  in  the  instance  of  Single  Tax 
excessive  monopolistic  profits  would  still  exist,  as 
before,  and  the  consumer  could  in  no  way  be  freed 
from  an  indirect  payment  of  the  land  tax. 

Equitably  Apportioning  Rent. 

Were  Single  Tax  in  full  operation,  the  public 
assessor  would  in  effect  be  called  upon  to  deter- 
mine the  annual  ground  rent  that  must  be  paid  by 
farmer,  merchant,  manufacturer,  banker  and  all 
other  men  whose  business  occupies  ground  space. 
This  means  the  full  net  annual  amount  in  dollars 
that  the  ground  space  is  worth  as  a  location,  or  as 
a  source  of  supply  of  natural  resources,  to  a  certain 
class  of  business.  Ground  rent  under  Single  Tax 
cannot  be  based  on  the  real  or  estimated  selling 
price  of  the  land  affected;  for  we  are  told  by  the 
supporters  of  tins  system  there  soon  will  be  no 
selling  price. 


34         UNTAXING  THE  CONSUMER 

As  Difficult  as  Price  Regulation. 

When  a  land  owner  no  longer  has  a  chance  to 
profit  by  possible  increase  in  the  value  of  his  land 
(or,  in  other  words,  when  the  element  of  specula- 
tion is  removed  from  real  estate  investments),  the 
income  from  improvements,  whether  the  latter  be 
erected  for  lease  or  for  occupancy  by  the  owner, 
must  be  made  more  secure  and  sufficient.    Single 
Tax,  or  land  rent  assessments,  must  be  so  adjusted 
in  amount  that  the  owner  of  improvements  will 
have  enough  of  an  excess  in  his  rents  to  leave  an 
attractive   income  after  covering  vacancies,  un- 
insured risks,  depreciation,  obsolescence,  insurance 
and  other  expenses.     Obsolescence  is  somewhat 
difficult  to  cover;  for  at  the  time  when  completed 
an  improvement  may  be  of  a  grade  of  one  hun- 
dred percent  for  the  particular  place  in  which  it 
is  located  and  through  unusually  rapid  growth  of 
the  city  or  through  the  shifting  of  a  particular  in- 
dustrial or  business  center  it  may  become  ninety 
percent   obsolete   almost   immediately.      If   land 
speculation  is  eliminated  these  and  other  contin- 
gencies will  have  to  be  provided  for  by  the  assessor 
through  adjusting  the  amount  of  Single  Tax  assess- 
ments, even  when  the  land  owner  is  himself  the 
tenant.     If  such  provision  is  not  made,  private 
improvements  will  necessarily  cease  to  a  great 
extent  and  public  construction  and  ownership  of 
improvements  for  private  business    will   have   to 
take  its  place  to  the  same  extent.  This,  although 
a  consequence  of  the  application  of  unqualified 
Single  Tax,  is  diametrically  opposed  to  the  Single 
Tax  theory;  but,  like  it,  would  present  many  diffi- 
culties under  present    social  conditions.     Once 
taxes   are   heavily    increased    to    effect   a    more 
rapid  material  and  social  development,  as   is  the 


UNTAXING  THE  CONSUMER         35 

intention  of  Single  Taxers  (and  this  will  be 
necessary  in  any  event),  and  land  alone  shall 
have  to  meet  the  entire  assessment,  it  is  prac- 
tically certain  that  this  assessment  will  be  so 
large  that  great  care  in  apportioning  the  tax 
will  be  required  to  avoid  frequent  and  ruinous  in- 
justice. It  will  demand  a  method  in  levying  taxes 
that  will  require  about  the  same  knowledge  re- 
garding a  business  as  would  be  necessary  to  regu- 
late fairly  the  prices  charged  by  that  business. 

The  Owner  Himself  Must 

Guarantee  Land  Rent. 

Under  Single  Tax  when  in  full  operation  the 
prospective  tenant  and  the  owner  of  an  improved 
city  lot  must  determine  jointly  what  the  rent  for 
the  improvements  shall  be,  and  the  assessing 
agencies  of  the  community  will  have  to  attempt 
annually  to  fix  the  rate  of  ground  rent  at  a  figure 
that  will  require  the  tenant  either  directly  or  in- 
directly to  pay  what  the  location  is  worth.  Any 
mistake  made  by  the  assessor  in  over-estimating 
the  amount  of  rent  value  of  the  land  would  some- 
times be  paid  by  the  tenant,  sometimes  by  the 
owner,  while  ultimately  the  entire  rent  would  be 
borne  by  the  consumer.  Generally  the  owner 
would  collect  from  his  tenant  both  the  rent  for 
improvements  and  the  ground  rent  and  would  turn 
the  latter  over  to  the  proper  authorities  for  public 
purposes  in  the  form  of  taxes.  But  the  owner  must 
pay  a  tax  equal  to  the  ground  rent,  whether  or  not 
his  tenant  pays  him  and  whether  or  not  his  prop- 
erty is  vacant.  In  other  words,  he  guarantees  the 
ground  rent  to  I  lie  public  and  to  this  extent  is 
surety  for  flic  n-nt  of  his  own  property.  In  in- 
stances where  the  tenant  contracted  to  pay  the 


36        UNTAXING  THE  CONSUMER 

taxes  directly  to  the  tax  collector  the  owner  never- 
theless would  guarantee  the  payment.  However, 
under  our  present  tax  system,  the  land  owner  is 
likewise  obliged  to  pay  the  tax  on  the  property  he 
leases  out,  which,  in  effect,  is  about  the  same  thing 
as  being  surety  for  the  payment  of  the  rent  of  his 
own  property  to  the  amount  of  the  assessment. 

Leasing  to  Highest  Bidder. 

The  following  has  been  seriously  suggested  as  a 
practical  method  of  determining  the  amount  of 
ground  rent  for  industrial  and  commercial  sites 
and  for  sites  containing  supplies  of  national  resour- 
ces; but  I  fear  great  social  changes  will  have  to 
take  place  before  it  can  be  applied.  At  a  given 
time,before  the  expiration  of  any  lease  on  a  site  of 
this  kind — or,  if  the  property  be  occupied  by  the 
owner,  then  at  stated  intervals — let  the  public 
authorities  solicit  bonafide  guaranteed  bids  for 
new  leases  from  any  citizen  on  any  such  parcel  of 
land  as  he  may  wish  to  rent.  If  any  bidder  offers 
more  for  a  location  than  is  offered  by  the  occu- 
pant, whether  tenant  or  owner,let  the  bidder  have 
it;  otherwise  let  the  original  occupant  continue  on 
the  premises  under  a  new  lease,  or  as  owner.  The 
public  authorities  would  then  pay  the  owner  out 
of  the  rent  they  receive  an  amount  to  cover  a 
good  net  interest  on  the  value  of  his  improve- 
ments, as  well  as  repairs,  depreciation,  obsoles- 
cence, risk,  running  expenses  and  other  costs. 
The  remainder,  if  any,  would  then  be  taken  by 
the  public  as  Single  Tax. 

The  application  of  this  plan  would  raise  ques- 
tions like  the  following:  the  permissible  length  of 
leases;  provision  for  additional  improvements  or 
changes  during  the  life  of  a  lease;  adjustments  for 
unusual  obsolescence,  vacancies  and  tenants'  de- 


UNTAXING  THE  CONSUMER         37 

linquencies  and  failures;  excessive  influence  of 
temporary  business  booms  and  depressions  on  size 
of  bids  for  leases;  real  or  imagined  favoritism 
shown  by  officials  toward  one  bidder  or  another; 
possible  combinations  fostered  by  merchants,  man- 
ufacturers or  professional  men's  associations  to 
prevent  free  bidding;  proper  relations  generally 
between  the  owner  of  improvements  and  the  pub- 
lic; pecuniary  adjustments  covering  injury  to  the 
business  of  occupying-owner  through  being  outbid 
on  the  lease  of  his  own  properties. 

Consolidated  Under  Single  Tax. 

Under  the  Single  Tax  system  fully  applied  all 
kinds  of  taxes  now  in  use  will  be  displaced  and 
assessments  will  be  levied  on  land  alone.  This 
means  that  taxes  now  levied  on  buildings  and  other 
improvements,  on  personal  property,  on  business 
activities,  on  articles  of  consumption,  on  incomes, 
on  imports,  etc.,  will  all  be  assessed  against  land 
(as  the  word  "land"  is  defined  by  Single  Tax  advo- 
cates), in  addition  to  what  is  already  levied  upon 
it.  It  is  generally  acceded  that,  as  civilization 
advances,  collective  or  governmental  activity 
must  expand  in  scope  and  taxes  must  increase  pro- 
portionately. This  increase  also  will  fall  onto  the 
land.  However,  the  plan  of  Single  Tax  provides 
that  the  so-called  natural  resources,  considered  as 
a  portion  of  the  land,  shall  be  more  heavily  assess- 
ed, perhaps  so  freely  as  to  offset  the  increase  that 
would  otherwise  be  necessary  on  city  and  farm 
land.  Single  Taxers  themselves  believe,  however, 
that  such  an  offset  would  be  only  partial.  But, 
as  explained  elsewhere,  the  consumer  would 
through  prices  of  commodities  have  to  pay  this 
extra  tax  on  natural  resources  just  as  he  pays  any 
other  "laud"  tax. 


38         UNTAXING  THE  CONSUMER 

Price  Fixing     Essential  to 
Fair,  Thorough  Taxation. 

Without  considering  the  detailed  knowledge 
required  for  the  full  application  of  Single  Tax,  the 
question  of  price  fixing  alone  presents  a  vital 
reason  for  knowing  the  business  details  of  the 
important  businesses  affected.  As  we  have  seen, 
regulation  of  prices  cannot  be  avoided  as  a  con- 
comitant of  any  complete  or  thorough  system  of 
taxation ;  for  otherwise  business  combinations  will 
take  from  the  citizen  through  advanced  prices 
whatever  remedial  benefits  might  accrue  to  him 
from  the  application  of  Single,  or  almost  any  other 
form  of,  tax.  It  must  be  borne  in  mind  that  as  a 
normal  result  of  economic  law  and  regardless  of 
competition  in  trade,  most  leading  articles  of  con- 
sumption in  time  go  into  the  control  of  combined 
or  dominating  industrial,  commercial  or  financial 
interests,  excepting,  of  course,  those  produced  by 
municipally  or  governmentally  owned  enterprises 
in  which  the  question  of  prices  narrows  down  to  a 
relatively  simple  problem.  However,  I  reiterate 
that  not  only  price  regulation,  but  free  land,  is 
essential  to  fair  taxation. 

Details  Unavoidable. 

Because  public  authorities,  in  assessing  effect- 
tively  for  Single  Tax,  must  determine  the  ground 
rent  with  increasing  accuracy,  they  will  eventually 
have  to  learn  fully  the  normal  possibilities  of  every 
kind  of  business  and  business  details  so  far  as  these 
affect  profits,  which  means  pretty  nearly  all  prin- 
cipal details — especially  where  the  source  of  raw 
materials  is  involved  or  where  location  is  the 
valuable  feature. 


UNTAXING  THE  CONSUMER         39 

City  Planning  a  Great  Aid. 

Some  of  the  difficulties  in  the  way  of  applying 
Single  Tax  could  be  remedied  by  intelligent  city 
planning,  including  districting  and  building  re- 
strictions. Besides  being  an  aid  in  apportioning 
taxes  based  on  rent  values,  such  planning,  if  in- 
telligently done,  always  tends  to  increase  the 
health  and  happiness  of  a  community  and  other- 
wise to  secure  the  permanence  of  private  invest- 
ments made  in  real  estate  improvements,  thus  en- 
couraging the  construction  of  better  buildings. 
Good  city  planning  would  tend  to  greatly  simplify 
the  problem  of  obsolescence.  But,  notwithstand- 
ing this,  as  I  have  frequently  stated,  under  the 
Single  Tax  plan  the  consumer  would  still  have  to 
pay  the  taxes  and,  therefore,  the  expenses  of  gov- 
ernment. 

A  Few  of  Many  Requirements 
In  the  Land  Law. 

To  exempt  land  from  taxation  altogether  and 
otherwise  make  it  as  free  as  physical  conditions 
will  permit  would  require  that  the  public  itself 
secure  a  closer  approximation  to  practical  owner- 
ship of  it  all  and  then  regulate  its  use  wisely. 
Private  proprietorship  would  then  consist  of  a 
reasonably  qualified  ownership  in  its  use  trans- 
mittable  to  heirs  ami  assigns  and  a  full  ownership 
in  the  improvements  upon  it. 

Laws  regulating  the  occupancy  and  use  of  land 
by  private  individuals  or  corporations  would  have 
lo  be  pul  into  effect  and  would,  among  other 
things,  have  to  provide  for: 

1.  Maximum  size  of  tax-free  allotments  to  be 
allowed  any  single  occupant    for  any  stated   pur- 

pose  under  given  conditions,  and  the  rates  of  tax- 


40         UNTAXING  THE  CONSUMER 

ation,  or  rent,  on  any  additional  or  excess  land 
desired  by  the  occupant,  the  extent  of  these  allot- 
ments to  be  dependent  on  the  need  of  the  occupant 
and  the  good  of  society  in  general. 

2.  The  minimum  use  to  which  an  allotment 
may  be  put  without  the  infliction  of  penalties  or 
without  forfeiture  of  the  right  to  use  or  occupy  the 
land.  Naturally  these  conditions  would  be  made 
as  liberal  as  possible  in  the  beginning. 

3.  Qualifications  of  public  officials  who  esti- 
mate the  use  made  of  land  by  occupants  and  the 
modus  operandi  for  determining  such  estimate. 

4.  Special  courts  and  juries  or  commissions  to 
which  the  citizen  may  appeal  for  a  revision  of  the 
estimates  regarding  the  use  he  has  made  of  his 
land. 

5.  Land  courts  or  commissions  for  deciding 
on  the  question  of  the  public  necessity  of  dispos- 
sessing a  tenant  and  taking  his  land  for  public 
uses,  or  for  changing  it  from  one  kind  of  private 
use  to  another  under  the  same  or  a  different  oc- 
cupant. These  courts  also  to  pass  on  the  value 
of  such  improvements  as  the  removed  tenant  may 
have  made,  as  well  as  the  damages  to  his  business 
suffered  by  him  on  account  of  such  removal. 

Regulations  of  this  sort  would  develop  into  a 
long  and  complicated  law;  but  it  would  be  a  much 
used  law  which  would  gradually  become  a  matter 
of  second  nature  to  official  and  citizen  alike. 

The  Consumer's  Proper  Share  of  Taxes. 

When  land  is  free  from  taxation  the  consumer's 
contribution  to  public  taxes  may  fairly  be  limited 
to  the  payment  of  moderate  profits  on  services  or 
commodities  furnished  by  public  ownership  enter- 
prises. Ultimately,  when  public  ownership  is  far 
more  general  and  when  incomes  are  largely  equal- 


UNTAXING  THE  CONSUMER         41 

ized  through  improvement  in  our  social  system 
and  a  general  advancement  of  individual  capacity, 
it  may  be  found  that  the  consumer  should  con- 
tribute towards  the  expenses  of  government 
through  utility  rates  in  the  proportion  that  public 
enterprises  supply  him  with  what  he  consumes. 
This,  to  be  sure,  is  equivalent  to  a  tax,  but  under 
these  circumstances  it  is  just;  for  it  takes  the  place 
of  liberal  private  profits  formerly  paid  by  him  and 
is  merely  a  case  where  he  makes  a  very  moderate 
payment  to  the  community  for  what  it  is  doing 
for  him  individually,  he  himself,  as  taxpayer,  par- 
ticipating in  the  profits.  However,  all  remaining 
public  funds,  so  far  as  there  may  be  need  of  more, 
should  be  derived  from  other  sources  than  an 
individual  as  consumer. 

When  Is  Land  Free  to  All? 

No  economic  system  can  be  really  fair,  how- 
ever, that  does  not  tend  toward  making  land  sub- 
stantially free  to  all,  and  practically  tax-free  to 
every  citizen  who  makes  good  use  of  it.  When 
land  is  obtainable  at  a  nominal  price  or  is  wholly 
free  of  cost  and  practically  free  from  taxation  to 
all  who  use  it  sufficiently,  and  when  the  prices 
of  important  products  are  reasonably  regulated 
throughout  from  producer  to  consumer,  then  only 
will  land  be  practically  free  to  every  citizen  regard- 
less of  his  occupation,  be  he  farmer,  mechanic, 
merchant,  minister,  soldier  or  sailor.  It  will  be 
free  almost  in  the  sense  that  air  and  water  are  free 
wherever  progressive  social  conditions  obtain. 

Some  Requirements  of  Fair  Taxation. 

In  a  society  which  is  well  balanced  and  highly 
developed  a  lax  system  should  be  used  which 
can  be  universally  applied.     Also  the  taxes  must 


42         UNTAXING  THE  CONSUMER 

be  direct,  in  order  that  their  weight  on  the  indi- 
vidual may  be  ascertained  clearly.  All  direct  and 
universal  taxes  are  not  necessarily  equitable;  but 
without  conforming  with  these  two  conditions 
they  can  never  be  equitably  applied. 

Per  Capita  Tax. 

A  per  capita  tax  of,  say,  $100.00  per  year  on  all 
able-bodied  adults  would  be  direct  and  universal 
in  its  application,  but  extremely  inequitable. 
However,  being  direct,  the  degree  of  its  inequity 
could  at  least  be  determined  as  far  as  such  a 
problem  can  be  solved. 

Commodity  Tax  Unfair  at  Present. 

The  direct  commodity  tax  is  an  assessment 
which  if  applied  to  articles  consumed  by  all, 
would  also  be  universal  in  its  application;  but, 
under  present  social  conditions,  although  the 
amount  paid  by  any  individual  could  be  deter- 
mined, it  would  be  quite  beyond  human  capacity 
to  make  it  even  approximately  equitable.  Only 
when  economic  and  social  conditions  are  so  far 
advanced  that  that  which  a  man  consumes  is 
definitely  related  to  the  taxes  he  ought  to  pay  can 
this  form  of  tax  be  made  fair.  The  time  for  this, 
however,  seems  distant. 

Land  Tax  an  Indirect  Commodity  Tax. 

Although  in  their  direct  form  land  taxes,  in- 
cluding Single  Tax,  are  a  limited  kind  of  assess- 
ment, they  are  in  the  final  analysis  indirect,  gen- 
eral, commodity  taxes.  Considered  in  this  light 
it  is  impossible  to  determine  how  much  of  them 
any  individual  pays.  It  is  very  evident  that  they 
are  not  and  can  not  be  fairly  apportioned. 


UNTAXING  THE  CONSUMER         43 

Some  Income  Taxes  Shiftable,  Others  Not. 

Corporation  Income  Tax. — Since  taxes 
assessed  against  business  are  in  a  true  sense  ex- 
penses, business,  whether  incorporated  or  not,  if 
subject  to  the  so-called  "Corporation  Income 
Tax",  will  in  every  instance  endeavor  to  recoup 
itself  through  increase  in  prices;  thus,  so  far  as  it 
can,  it  will  shift  its  income  tax  onto  the  consumer, 
as  it  does  the  land  tax. 

Income  taxes  on  profits  of  corporations  (and, 
under  the  present  law,  co-partnerships),  if  assessed 
on  net  income  according  to  its  size  and  regardless 
of  the  capital  invested,  is  fixed  at  a  uniform  rate 
and  not  at  a  progressively  increasing  one.  If  this 
were  not  done,  numerous  stockholders  or  share- 
holders would  be  very  unfairly  taxed.  For  in- 
stance, let  us  compare  two  corporations,  one  hav- 
ing a  capital  stock  of  $100,000.00  making  an 
annual  profit  of  $10,000.00,  or  ten  percent,  the 
other  having  a  capital  stock  of  $1,000,000.00  and 
realizing  an  annual  gain  of  ten  percent,  or  $100,- 
000.00.  Suppose  an  income  tax  on  corporation 
profits  were  assessed  at  a  uniform  rate — -four  per- 
cent, for  instance.  After  paying  the  income  tax 
the  smaller  company  would  have  $9,600.00  left  for 
distribution  and  could  declare  a  dividend  of  9.6%; 
th<  larger  company  would  have  $96,000  left  for 
distribution  and  could  also  declare  a  dividend  of 
9.6%.  It  is  seen,  then,  that  a  stockholder  owning 
S],0D0.i)0  face  value  of  capital  stock  in  either  com- 
pany would  receive  S90.00  in  dividends  from  a 
ten  percent  profit.  If  on  the  other  hand  a  pro- 
gressive income  tax  were  levied  <>n  corporation 
profits,  the  smaller  company's  profits  mighl  be 
assessed   at   a   progressively  increasing  scries  of 


44         UNTAXING  THE  CONSUMER 

rates,  resulting  in  the  aggregate  in  a  ten  percent 
tax  on  the  total  profits,  while  the  larger  income  of 
the  other  company  would  naturally  be  assessed  at 
a  more  extended  series  of  rates  amounting  in  the 
aggregate  possibly  to  fifty  percent.  In  such  case 
the  owner  of  $1,000.00  of  stock  in  the  smaller 
would  receive  a  dividend  of  $90.00  and  the  owner 
of  the  same  amount  of  stock  in  the  larger,  a  divi- 
dend of  only  $50.00.  A  corporation  income  tax 
law  of  this  kind  would  be  unfair  on  its  face  and  so 
detrimental  to  the  public  interest  that  no  possi- 
bility exists  of  one  being  enacted.  It  is  quite 
evident,  then,  that  a  Corporation  Income  Tax 
based  on  the  size  of  the  net  income,  irrespective 
of  the  percentage  of  profit  accruing  to  the  business, 
must  be  levied  at  a  uniform  rate.  Such  a  rate  can- 
not fairly  be  much  above  the  "normal"  rate  on 
private  incomes;  otherwise  there  would  be  inequity 
between  taxes  on  individual  incomes  derived  from 
the  stock  or  shares  of  corporations  and  co-partner- 
ships and  on  individual  incomes  derived  from 
strictly  private  effort  or  enterprise.  Now,  since 
the  "normal"  rate  on  private  incomes  will  in  ordi- 
nary times  always  be  relatively  low  for  practical 
reasons,  the  Corporation  Income  Tax  just  referred 
to  will  be  likewise  low.  Therefore,  being  both  low 
and  uniform,  it  is  particularly  easy  to  shift  onto 
the  consumer. 

Surtax,  or  Additional  Income  Tax. — The  tax 
on  incomes  assessed  progressively  according  to 
their  size  or  amount,  although  not  practicable  for 
corporations  or  partnerships,  is  under  the  names 
of  "Surtax"  or  "Additional  Income  Tax"  applied 
to  individual  incomes.  This  tax  is  employed  in 
every  country  where  any  form  of  individual  in- 
come tax  is  used. 


UNTAXING  THE  CONSUMER         45 

Excess  Profits  Tax.— The  "Excess  Profits 
Tax"  is  a  variety  of  income  tax  which  it  is  con- 
sidered practical  to  levy  on  business  profits  gen- 
erally, whether  of  corporations,  co-partnerships  or 
private  business.  It  is  assessed  at  a  progressively 
increasing  rate  against  such  part  of  the  business 
profit  as  may  be  in  excess  of  a  legally  allowed  or 
exempt  rate  of  profit  on  the  invested  capital. 

If  the  tax  be  moderately  levied,  it  can  and  will 
be  shifted  over  to  the  consumer,  unless  prices  are 
wisely  and  accurately  regulated  to  prevent  this. 
If  the  highest  rate  is  one  hundred  percent,  or  in 
some  cases  even  as  low  as  eighty  percent,  of  the 
excess  profits,  it  will  defeat  itself;  because  prices 
will  voluntarily  be  lowered  so  as  to  avoid  earning 
that  portion  of  the  excess  profits  affected  by  these 
high  rates,  or  extravagant  business  methods  will 
be  employed  for  the  purpose  of  consuming  or 
wasting  such  portion  of  these  profits. 

We  might  think  that  the  Excess  Profit  Tax  in 
its  higher  percentages  is  a  suitable  device  to  reg- 
ulate prices;  but  it  would  be  so  imperfect,  un- 
certain, crude  and  extravagant  a  method  as  to 
make  its  continued  use  for  such  a  purpose  unbus- 
inesslike. However,  such  a  tax  might,  in  certain 
cases;  be  made  valuable  as  an  emergency  measure 
for  partially,  roughly  and  indirectly  regulating 
prices  until  it  became  feasible  to  regulate  them 
directly  and  scientifically.     (See  foot  note.) 

But  whether  or  not  it  is  feasible  to  raise  prices 

to  meet  a  tax,  whether  or  not  the  Government 

regulates  prices,— the  consumer  must   still   cover 

all  taxes  paid  by  business,  for  otherwise  the  latter 

would  drift  toward  insolvency. 

Foot  Note:    So  far  utbeBxceu  Profit  Tax  may  be  covered  by 
prices  charged  the  consumer,  it  la  equivalent   i"  an  indirect   com 
nudity  tax  and  to  the  extent  to  which  it   in  borne  by  business  it 
lessens  dividends  and  it  equivalent  to  an   Indirect   Income  Tai  on 

the  stockholder. 


46         UNTAXING  THE  CONSUMER 

Individual  Income  Tax  Difficult  to  Shift. 

It  seems  clear  enough  that  the  tax  on  business 
is  practically  all  shiftable  to  the  consumer.  But 
it  is  also  clear  that,  if  business  is  relieved  of  taxa- 
tion, this  would  not  automatically  guarantee  the 
consumer  such  prices  as  are  really  fair  to  him. 
Such  prices  can  be  established  only  through  intel- 
ligent price  regulation  by  State  or  Nation. 

Even  if  we  bring  about  tax-free  land  and  busi- 
ness and  price  regulation,  taxes  would  still  have 
to  be  levied,  and,  in  order  to  improve  the  present 
situation,  they  would  have  to  come  from  sources 
of  such  nature  that  would  not  allow  the  burden  to 
be  shifted  onto  the  consumer.  So  far  as  I  can 
ascertain  the  Income  Tax  on  individual  incomes 
is  the  only  one  that  could  not  to  any  great  extent 
be  made  to  fall  upon  the  consumer. 

There  are  relatively  few  cases  in  which  indi- 
vidual members  of  a  firm  or  stockholders  of  a 
corporation  are  in  position  to  raise  prices  so  as  to 
cover  even  their  individual  income  taxes.  As  a 
matter  of  fact,  taxes  on  individual  incomes  are  for 
the  most  part  not  shifted,  and  for  this  reason  the 
Individual  Income  Tax  may  be  the  best  to  adopt 
ultimately,  as  it  will  save  business,  as  well  as  the 
consumer,  from  taxation.  As  already  made  ap- 
parent, this  can  be  done  with  the  best  result  only 
when  business  is  regulated  in  the  interest  of  the 
public  and  when  our  plans  and  devices  for  levying 
the  Income  Tax  on  individuals  are  better  devel- 
oped. 

The  tax  on  individual  incomes  is  or  can  be  made 
practically  universal.  It  is  direct  and  the  exact 
amount  paid  by  the  individual  is  known.  It  is  an 
attempt  to  tax  the  citizen  in  a  general  way  accord- 
ing to  the  good  that  accrues  to  him  through  the 


UNTAXING  THE  CONSUMER 


47 


organization   that   gives   society   its   permanence 
and  safety. 

All  this  does  not  mean  that  a  tax  is  equitable 
merely  because  it  is  an  Income  Tax,  but  that  the 
Income  Tax  itself  is  one  that  can  be  made  reason- 
ably equitable.  Doubtless  it  will  take  time  and 
experience  to  perfect  the  Income  Tax,  but  less  than 
would  be  required  for  any  other  form  of  taxation 
designed  for  equity  yet  suggested. 

A  Classification  of  Public  Taxes. 

[Individual  Income 
Universal  {  Revenue')      Tax 

(scientifically 
developed) 

Revenue,  such  as: 
Personal  property. 
Commodity. 
Tariff  for  revenue. 
Stamp. 
License. 
Franchise. 
Land  (ordinary.) 
Land  (Single  Tax),  etc.,  etc. 
Some  of  these  can  also  be  classed 
as  remedial. 


Public 
Taxes 


Limited     \ 


Remedial 


Social. 

Compensating. 

Punitive. 


This  classification  is  not  offered  for  any  other 
use  than  the  immediate  and  limited  purpose  of 
this  discussion.     By  its  means  the  definition  of 

universal  revenue  tas  i-  made  clearer. 


48        UNTAXING  THE  CONSUMER 

Taxable  People. 

Taxable  individuals  are  those  that  have  in- 
comes in  excess  of  the  cost  of  a  normal  living  as 
empirically  estimated  by  the  makers  of  our  tax 
laws. 

Universal  Taxes. 

Taxes  levied  with  the  intention  of  assessing  all 
taxable  individuals  in  some  practical,  approxi- 
mately fair,  ratable  degree,  are  universal,  and 
their  primary  purpose  is  to  obtain  revenue. 

Limited  Taxes. 

Taxes  that  do,  and  from  their  nature  must, 
altogether  miss  a  large  number  of  taxable  people 
or  which  affect  some  persons  relatively  far  less 
than  others,  are  limited  taxes.  They  often  reach 
individuals  whose  income  is  less  than  what  is 
fixed  as  the  minimum  for  a  normal  living. 

Limited  Revenue  Taxes. 

The  following  are  common  examples :  Personal 
property  taxes,  commodity  taxes,  tariff  for  reve- 
nue, and  stamp,  license,  franchise  and  land  taxes. 
The  primary  purpose  of  these  taxes  is  to  raise 
revenue. 

All  direct  property  taxes  may  be  regarded  as 
limited,  even  when  applied  in  the  most  scientific 
manner;  for  many  people  having  liberal  incomes 
and  who  ought  to  pay  a  fair  share  of  the  costs  of 
government,  accumulate  but  little  property  and 
in  consequence  pay  less  in  taxes  than  their  just 
proportion. 

Never  will  the  land  tax  be  other  than  limited. 
As  a  direct  tax  against  the  land  owner  it  must 
always  remain  so;  for  not  all  people  are  land 
owners.    As  an  indirect  tax  upon  the  consumer  it 


UNTAXING  THE  CONSUMER         49 

must  also  be  limited,  as  the  term  limited  is  defined 
above,  because  its  final  apportionment  among  con  - 
sumers  is  haphazard  and  is  levied  irrespective  of 
equity. 

Limited  Remedial  Taxes. 

Taxes  whose  primary  object  is  to  mitigate  or 
counteract  some  social  fault  or  some  public  annoy- 
ance, come  under  this  head. 

Limited  Remedial  Social  Taxes. 

The  inheritance  tax,  for  instance,  if  regarded 
as  a  protection  to  society  by  reason  of  its  checking 
the  increasing  accumulation  of  great  wealth  and 
power  under  one  management,  is  a  Limited 
Remedial  Social  Tax. 

Limited  Remedial  Compensating  Taxes. 

To  give  a  specific  example  of  this  form  of  assess- 
ment: Some  states  levy  a  tax  on  undersized  iron 
tires  on  vehicles  designed  for  heavy  loads.  This, 
when  assessed  for  the  purpose  of  compensating  or 
repaying  a  community  for  extra  damage  caused  as 
a  result  of  cutting  the  surface  of  public  roads,  be- 
comes a  Limited  Remedial  Compensating  Tax. 

Limited  Remedial  Punitive  Taxes. 

Again,  if  the  extra  expense  of  maintaining  roads, 
due  to  these  narrow  iron  tires,  does  not  require  a 
sufficiently  high  tax  to  drive  the  tires  out  of  use, 
and,  if,  to  compel  the  use  of  wider  iron  tires,  the 
public  imposes  a  higher  tax,  it  becomes  a  Limited 
Remedial  Punitive  Tax. 

Taxes  Not  Clearly  Defined  as  to  Class. 

The  Inheritance  Tax  is  by  many  regarded  as 
merely  a  limited  revenue  tax.    It  produces  revenue 


50        UNTAXING  THE  CONSUMER 

liberally;  but  it  has  a  greater  social  purpose,  as 
already  stated,  and  in  this  respect  is  a  Limited 
Remedial  Tax.  According  to  the  point  of  view  of 
the  reader,  the  tax  on  intoxicants  may  be  regarded 
either  as  a  revenue  or  remedial  tax,  and,  under  the 
latter  classification,  may  be  defined  as  a  social, 
compensating  or  punitive  tax  or  even  as  an  ad- 
mixture of  these.  The  true  classification  of  any 
tax,  however,  depends  entirely  on  what  in  fact  is 
its  principal  purpose  or  effect.  Now,  Remedial 
Taxes  are  limited  by  their  very  purpose  which  can 
be  accomplished  only  by  restricting  them  to  those 
individuals  or  that  part  of  the  public  meant  to  be 
affected  or  influenced  by  them. 

Universal  Revenue  Taxes. 

The  Individual  Income  Tax  seems  practically 
the  only  one  that  can  be  applied  universally  and 
with  any  degree  of  equitableness;  though  it  can, 
of  course,  be  applied  very  unfairly  and  thus  be- 
come a  Limited  Revenue  Tax.  In  fact,  the  In- 
come Tax  will  probably  gradually  develop  from  a 
semi-Limited  Revenue  Tax  into  a  Universal 
Revenue  Tax. 

An  Instrument. 

Single  Tax  has  a  double  primary  purpose :  first, 
remedial,  to  make  it  impossible  to  hold  vacant 
land  and,  technically  speaking,  difficult  to  hold 
partly  vacant  land;  second,  revenue  raising,  to 
furnish  all  the  funds  necessary  for  government. 

Single  Tax  is  a  limited  remedial  tax  which  dur- 
ing its  introduction  is  also  punitive,  being  imposed 
on  all  purchasers  of  land  as  a  fine  or  punishment 
for  their  still  owning  it  and  holding  it  privately 
for  sale.  Its  punitive  purpose  is  to  turn  back  to 
the  public  (who  should  always  have  held  it)  all 


UNTAXING  THE  CONSUMER         51 

ownership  in  the  land  without  remuneration. 
After  imposing  the  penalty  on  the  owner,  which 
automatically  and  instantaneously  must  follow 
the  introduction  of  unmodified  Single  Tax,  it  will 
operate  as  a  limited  remedial  social  tax,  to  keep 
private  individuals  from  withholding  land  from 
use  or  holding  it  under  inadequate  use. 

The  ultimate  purpose  of  Single  Tax  is  to  effect 
general  economic  equity;  but  its  application, 
especially  in  its  pure  form,  will  end  in  giving  us 
an  indirect  commodity  tax  and  otherwise  burden 
us  with  the  continuance  of  an  economic  system 
that  has  become  unfair  and  far  behind  the  require- 
ments of  the  times. 

May  Be  Compelled  to  Use  Single  Tax. 

Limited  remedial  taxes  are  not  equitable  in 
nature;  yet,  until  society  has  reached  a  more  ad- 
vanced stage  of  political  acumen  and  a  higher 
degree  of  perfection  in  character,  they  may  in 
some  form  remain  essential  to  progress. 

If  the  people  remain  indifferent  to  the  land 
question,  Single  Tax  may  have  to  be  used  as  a 
temporary  instrument,  even  though  crude,  waste- 
ful and  arbitrary.  It  may  even  have  to  be  em- 
ployed ruthlessly  before  the  public  can  be  awak- 
ened to  the  coming  seriousness  of  our  land  question 
and  to  the  danger  to  our  social  progress  of  making 
use  of  superficial  symptomatic  remedies  in  the  so- 
lution of  this  question. 

Human  Nature  Responsible. 

There  is  a  universal  desire  to  get  as  much  as 

possible  for  one's  efforts,  even  when  donating  them 
to  a  good  cause.  In  this  latter  case  we  do  not 
receive  money  for  our  efforts,   but   endeavor  to 


52        UNTAXING  THE  CONSUMER 

obtain  the  greatest  results  possible,  in  order  to 
increase  the  personal  satisfaction  in  our  labor. 

The  tendency  of  business  to  shift  the  Income 
Tax,  like  all  others,  to  the  consumer  arises  from 
the  natural  desire  in  the  investor  and  producer  to 
obtain  as  great  a  net  return  as  possible  from  his 
investment,  or  from  his  labor  and  thought. 

It  is  the  same  even  with  the  isolated  frontiers- 
man who  has  the  winter's  firewood  to  cut.  He  has 
a  choice  between  green  pine  logs  and  dry  oak  logs. 
He  also  has  a  saw  that  will  cut  the  oak  with  half 
the  effort  that  will  be  needed  to  saw  the  pine,  and 
he  can  get  no  other.  The  green  pine  will  give  him 
but  one-third  of  the  heat  that  the  dry  oak  will 
produce.  In  other  words,  it  will  cost  him  six  times 
as  much  labor  to  produce  the  required  winter's 
fuel  if  he  saws  the  pine  as  if  he  cuts  the  oak.  His 
desire  to  get  the  most  for  his  efforts  will,  therefore, 
lead  him  to  saw  his  oak  logs,  provided  that  in  this 
particular  instance  there  is  no  special  value  for 
other  purposes  in  the  oak  over  the  pine. 

The  tendency  that  leads  the  frontiersman  to 
cut  oak  in  preference  to  pine  logs  strongly  in- 
fluences the  business  man  to  increase  the  income 
of  his  business  with  the  least  extra  effort  possible, 
so  as  to  cover  as  nearly  as  may  be  the  newly 
created  expense  arising  from  Income  Taxes.  In 
fact,  it  is  just  such  a  simple  and  natural  tendency 
that  is  directly  and  fundamentally  responsible  for 
the  development  of  our  whole  monopoly-promot- 
ing, financial  system,  and  also  for  the  very  great 
measure  of  private  control  that  this  system  is 
under.  It  is  partly  because  of  this  ever  present 
tendency  that  it  is  well  to  tax  the  income  of  each 
individual  as  soon  as  practicable,  assessing  busi- 
ness less  and  less.    Let  me  say  again,  this  should 


UNTAXING  THE  CONSUMER         53 

be  done  only  as  price  regulation  is  developed,  how- 
ever, and  the  payment  of  individual  income  taxes 
is  made  difficult  to  avoid. 

That  Constant  Inclination. 

That  same  ever  active,  inherent  tendency  that 
keeps  an  individual  striving  for  the  greatest  per- 
sonal gain  will  in  innumerable  ways  lead  him  to 
shift  as  much  of  his  Tax  as  he  can  and  whatever 
part  of  it  is  thus  transferred  has  to  be  met  finally 
by  the  consumer.  Every  such  desire  or  force  of 
human  nature  is  a  psychologic  pressure  that  moves 
onward  until,  in  the  course  of  time,  it  meets 
counter  forces  which  divert  it  or  hold  it  in  check. 
Such  a  tendency,  while  resulting  in  material  gain, 
is  a  necessary,  elemental  basis  for  the  development 
of  intelligence  in  animal  life.  It  even  has  its 
counterpart  in  plant  life.  A  tree,  for  instance, 
having  on  one  side  poor,  moisture-losing  soil  and 
on  the  other  side  rich,  moisture-retaining  ground, 
will  send  many  more  roots  into  the  good  soil  than 
into  the  other.  Some  people  might  reason  that  it 
should  be  expending  extra  energy  to  send  more 
roots  into  the  poorer  soil,  so  as  to  make  up  for  its 
greater  difficulty  in  gaining  nourishment  from  that 
Bide.  However,  this  desire  to  accomplish  results 
with  the  least  effort  is  good.  Only  when  it  is  used 
to  the  undeserved  hurt  or  disadvantage  of  others, 
consciously  or  unconsciously,  does  it  become  bad. 
Society  is  auch  a  complex  problem  that  this  injury 
is  for  a  long  time  unrecognized;  but  after  it  is  dis- 
covered a  more  or  less  practical  remedy  is  slowly 
evolved  in  the  public  mind,  and,  following  this, 
laws  and  methods  an-  gradually  developed  to  curb 
an  individual's  efforts  to  obtain  unfair  advantage. 


(/ 


54        UNTAXING  THE  CONSUMER 

Taxation  and  Human  Development. 

Not  everyone  realizes  that  taxation  has  a  pro- 
found bearing  upon  human  development  and  that 
no  two  systems  exert  the  same  influence.  Land 
tax,  as  we  have  seen,  is  shifted  onto  the  consumer. 
The  individual  Income  Tax  can  be  thus  shifted  to 
a  limited  extent  only.  With  the  earnest  effort  of 
society  to  protect  itself  by  preventing  undue  dam- 
age to  some  of  its  members  through  the  individual's 
tendency  to  get  all  he  can  for  his  efforts,  it  will 
become  more  and  more  difficult  to  load  the  Indi- 
vidual Income  Tax  or  any  portion  of  it  onto 
others. 

I  believe  the  proposed  plan  of  taxation,  in  con- 
junction with  the  corelated  social  plans  herein 
discussed,  is  more  just  and  more  practicable  than 
other  ideas  thus  far  suggested  and  will  do  more  to 
bring  us  to  the  next  higher  level  of  social  progress 
than  if  Single  Tax  or  any  other  new  land  tax  were 
interjected.  The  Income  Tax  is  probably  our  final 
type.  The  only  constant  problem  in  connection 
with  it  is  the  exact  form  it  should  take  to  meet 
changing  conditions  until  such  time  when  a  uni- 
form rate  on  all  incomes  would  be  just. 

Cities  the  Product  of  Taxation. 

The  average  vacant  city  lot  has  cost  its  owner 
and  his  predecessors  taxes  for  years.  They  have 
been  compelled  to  pay  assessments  for  street  grad- 
ing and  paving,  sidewalks,  sewers,  storm  drains, 
street  openings  and  other  public  improvements. 
Besides,  the  lot  has  been,  assessed  for  bonds  to 
build  schools,  engine  houses,  police  headquarters, 
city  hall,  incinerators,  water  works,  parks  and 
other  public  institutions;  it  has  been  taxed  for  a 
share  of  the  running  expenses  of  these  schools,  fire, 


UNTAXING  THE  CONSUMER         55 

health  and  police  departments,  street  lights, 
etc.:  it  has  been  assessed  for  operating  or  con- 
ducting the  legislative  or  administrative  de- 
partments of  city,  county  and  state.  The  sum 
total  of  these  and  similar  other  expenses  represents 
the  cost  of  permanent  public  improvements  and 
of  reaching  by  education  and  experience  whatever 
efficiency  has  been  developed  in  the  operation  of 
our  various  governmental  departments.  Without 
^such  efficiency  as  we  have  today  our  governments 
would  not  be  able  to  control  cities  or  larger  social 
units.  To  be  sure,  some  of  the  taxes  paid  in  behalf 
of  the  lot  have  been  undoubtedly  wasted;  but  the 
money  thus  lost  was  just  as  necessary  for  the 
acquisiton  of  experience  as  though  it  had  not 
been  wasted. 

It  is  seen,  then,  that  the  lot  has  paid  off  a  cer- 
tain portion  of  the  cost  of  preparing  the  territory 
within  incorporated  limits  for  city  life,  by  reason 
s^  of  which  people  settled  in  that  locality,  the  result 
being  a  city.  Without  the  payment  of  these  taxes 
no  city  could  have  been  possible — the  community 
could  not  have  grown  beyond  the  limits  of  a  mere 
village. 

Taxes  and  assessments,  therefore,  paid  in  be- 
half of  each  individual  lot  for  district,  city,  county 
and  state  purposes,  are  responsible  proportionally 
for  the  existence  of  the  city,  county  and  state  in 
which  the  lot  is  located.  Without  the  congrega- 
tion of  people  there  could  be  no  large  community; 
but,  asjusi  stated,  they  could  not  have  thus  gath- 
ered together,  unless  individual  proprietors  had 
paid  the  taxes  <>n  their  land. 

Vacant  Lots  and  City  Planning. 

Without  question  each   vacanl    lot    has  been 


56         UNTAXING  THE  CONSUMER 

somewhat  of  an  expense  to  the  city  during  all  these 
years;  but,  until  city  builders  in  America  have 
developed  city  planning  into  a  science  that  will 
show  how  to  get  along  with  the  practical  minimum 
of  vacant  lots  with  which  to  provide  for  anticipated 
growth,  such  lots  in  liberal  number,  owned  pri- 
vately or  by  the  public,  will  be  a  necessary  and 
costly  evil  in  the  United  States.  If  private  indi- 
viduals had  not  owned  them  in  the  past,  the  public 
would  have  of  necessity  been  the  proprietor,  and 
the  owners  of  improved  lots,  of  course,  would  have 
had  to  pay  just  so  much  more  in  taxes  as  would 
otherwise  have  been  paid  upon  this  vacant  prop- 
erty. 

Many  Losses. 

It  is  practically  certain  that  at  prices  prevailing 
during  the  late  real  estate  activity  in  the  United 
States  the  average  vacant  city  lot  was  not  a  paying 
investment,  taking  it  for  the  entire  period,  say, 
since  1880  or  1890.  This  seems  true  even  where 
the  property  has  remained  under  its  original  own- 
ership and  where  the  original  price  is  altogether 
ignored  and  the  investment  cost  is  taken  at  only 
the  total  which  has  been  expended  for  taxes  and 
assessments. 

The  fact  is  that  a  large  proportion  of  vacant 
city  lots  has  cost  their  owners  in  taxes  and  assess- 
ments more  than  they  can  be  sold  for  in  average 
times;  yet,  for  various  reasons,  this  has  not  result- 
ed in  their  being  improved.  In  very  many  cases 
improvement  for  rental  purposes  did  not  promise 
to  pay  the  proprietor  a  fair  income  on  the  invest- 
ment, not  counting  the  cost  of  the  lot  at  all. 
Under  either  Single  Tax  or  under  Government 
Control  of  land,  as  herein  advocated,  these  invest- 


UNTAXING  THE  CONSUMER         57 

ments  in  lots  could  not  have  occurred  and,  of 
course,  the  losses  would  not  have  resulted.  As  it 
was,  the  lots  were  poor  investments  at  even  nomi- 
nal prices. 

Single  Tax  Capitalization  in  Vacant  Lots. 

According  to  the  theory  of  Single  Tax  the  taxes 
and  assessments  invested  in  a  city  lot  for  public 
improvements  and  for  the  purpose  of  creating 
social  and  political  conditions  that  make  city  life 
possible  should  be  regarded  as  untaxable  improve- 
ments, especially  if  there  has  been  no  opportunity 
in  the  past  to  construct  paying  improvements  on 
the  lot.  Under  Single  Tax  these  improvements 
should  theoretically  not  be  taxed  away  from  the 
owner,  as  is  the  intention  of  Single  Taxers,  because 
their  value  is  rightfully  a  part  of  the  private  capital 
on  which  rents  in  favor  of  the  owner  should  be 
based.    (See  appendix  page  95.) 

Detailed  Investigation. 

In  this  country  strenuous  campaigns  have  been 
carried  on  for  about  ten  years  in  favor  of  various 
modifications  of  Single  Tax.  The  burden  of  this 
long  continued  struggle  has  been  carried  largely  by 
sincere  men  and  tli"  economic  results  expected 
from  the  application  of  this  tax  by  its  advocates 
are  certainiy  desirable.  Yet  it  seems  that  many 
of  these  advocates  have  lacked  that  self-exacting 
attitude  thai  compels  men  to  doubt  their  own 
theories  until  they  have  been  proved  by  strictly 
applicable,  completed  experiment,  or  at  leasi  sub- 
Stantiated  in  part  by  :i  detailed  practical  study 
where  no  such  experiment  is  available.  In  the 
case  of  Single  Tax  this  quality  of  thoughl  would 

hove  led  them  to  make  as  best   I  hey  could  an  I  \ 


58         UNTAXING  THE  CONSUMER 

perimental  assessment  over  a  representative  area 
— a  county,  for  instance — including  all  kinds  of 
"land".  This  study  would  also  have  to  deal  with 
the  question  of  equity  involved  in  such  assess- 
ments, especially  in  cases  where  unusual  effects 
might  occur. 

Several  years  might  be  required  to  complete 
such  a  tentative  assessment  satisfactorily,  and 
very  many  hard  problems  might  be  encountered 
for  solution  if  the  work  were  done  with  the  open, 
honest  and  far-seeing  minds  of  men  that  have  the 
confidence  of  the  public.  This  study  might  devel- 
op differences  of  opinion  calling  for  patience  and 
tolerance,  and  it  might  be  found  by  its  own  sup- 
porters that  the  Single  Tax  theory  would  require 
radical  or  even  revolutionary  changes.  After  such 
a  study,  greater  confidence  would  be  established 
and  the  cause  of  free  land  would  be  on  a  far  safer 
basis,  because  there  would  be  fewer  unexpected 
problems  left  for  solution.  On  the  other  hand, 
many  unsolved  problems  to  overcome  during  an 
introductory  application  of  the  tax  might  com- 
pletely wreck  the  cause  of  free  land  for  years  to 
come. 

Some  Experiments. 

According  to  an  editorial  a  couple  of  years  ago 
in  the  "Public"  of  Chicago,  a  Single  Tax  periodi- 
cal, the  nearest  experiment  to  unqualified  Single 
Tax  thus  far  made  was  by  Germany  in  Kiao  Chou, 
it  having  been  introduced  at  the  founding  of  that 
city.  This  experiment  was  doubtless  ended  by  the 
Japanese  when  they  conquered  Kiao  Chou,  but  it 
might  have  proved  of  inestimable  value  as  a  basis 
to  work  on.  In  Kiao  Chou,  however,  the  experi- 
menters did  not  have  to  contend  with  the  many 


UNTAXING  THE  CONSUMER         59 

problems  or  obstacles  that  would  have  to  be  over- 
come in  long  established  communities  developed 
under  other  tax  systems,  though,  as  in  the  cases 
under  discussion,  the  consumer  paid  the  taxes. 

The  pending  Single  Tax  initiative  law  in  Cali- 
fornia is  radically  different  from  that  anywhere  in 
operation,  except  in  Australia.  However,  Niel 
Nielson,  Trade  Commissioner  to  America  from 
Xew  South  Wales,  in  a  letter  to  the  State  Tax 
Commission  of  California,  says  that  'the  people  of 
Australia  are  not  single  taxers'.  What  part  of  the 
Single  Tax  theory  they  do  not  accept  is  not  stated. 

As  I  understand  the  case,  if  the  pending  Cali- 
fornia law  carries  at  the  next  election,  vacant  and 
partly  vacant  land  in  this  state  would  have  to  be 
taxed  more  in  proportion  to  its  average  earning 
capacity  than  in  any  other  community,  including 
Australia.  In  that  continent,  the  exclusive  land 
tax  was  inaugurated  twenty-three  years  ago, — not 
as  early  in  the  history  of  the  development  of  that 
community  as  in  Kiao  Chou,  but  relatively  earlier 
than  if  it  were  introduced  in  California  now.  As 
applied  in  Australia  it  was  a  modified  Single  Tax 
with  very  light  assessments  at  first,  which  were 
later  added  to  by  means  of  a  surtax  on  land  and 
again  by  a  federal  land  tax.  However,  the  com- 
bined assessments,  we  are  told,  do  not  yet  equal 
the  rental  value  of  the  land. 

I  am  not  sufficiently  conversant  with  the  quali- 
fying facts  regarding  the  modified  Single  Tax  ;is 
;ip|)li'''l  in  Australia  to  understand  why  "The 
Public"  did  not  regard  it  in  the  same  class  as  thai 
Inaugurated  in  Kiao  Chou. 

So  far  as  we  seem  to  know  (having  no  available 
data),  flic  land  taxes  in  Australia,  excepl  for  large 

holdings  which  are  subjecl  to  a  progressive  surtax, 

amount  to  no  greater  percent  of  the  rental  value 


60         UNTAXING  THE  CONSUMER 

of  land  than  do  our  present  taxes  on  land  in  Cali- 
fornia. Therefore,  if  the  California  amendment 
carries,  the  taxes  on  land  within  that  state  would 
become  relatively  much  higher  than  in  Australia; 
for  it  is  definitely  claimed  that  the  amendment 
will  increase  taxes  on  agricultural  and  on  city,  as 
well  as  other,  "land".  If  these  taxes  should  be 
approximately  doubled  in  California,  most  of  the 
vacant  and  nearly  vacant  land  now  assessed  at  an 
average  rate  for  its  class,  if  not  ripe  for  substantial 
improvement,  will  be  a  total  loss  to  its  owners. 

In  view  of  the  foregoing  considerations  the  fact 
that  a  similar  plan  is  in  force  in  Australia,  where 
it  was  introduced  in  the  earlier  days  of  its  social 
and  political  development,  does  not  in  itself  prove 
that  the  proposed  California  initiative  law  is 
equitable  or  even  temporarily  feasible.  Compli- 
cations and  troubles  will  begin  in  Australia  or  any- 
where else  when  taxes  on  land  become  approxi- 
mately equal  to  its  rental  value.  Then,  at  last,  it 
will  be  apparent  that  land  must  be  made  truly 
"free",  in  order  to  prevent  this  problem  from  be- 
coming too  complicated  and  to  get  the  greatest 
social  good  out  of  "land".  It  will  then  also  grow 
more  apparent  that  free  land  is  necessary  to  pro- 
tect the  consumer's  interests. 

A  Forecast. 

From  what  has  been  said  it  is  safe  to  forecast 
that  the  social  system  must  in  time  not  only  in- 
clude free  land,  but  there  must  be  a  large  measure 
of  official  price-fixing,  and  of  public  ownership. 
The  individual  income  tax  further  perfected,  or 
some  closely  equivalent  tax,  must  be  employed 
while  the  inheritance  tax  will  still  linger  on  as  a 
remedial  social  tax. 


UNTAXING  THE  CONSUMER         61 

Fair  and  Simple  Tax  Plan  Yet  Unknown. 

Under  present  complicated,  economic  condi- 
tions there  is  little  likelihood  of  developing  an 
equitable  tax  plan  that  is  simple,  especially  if  we 
consider  as  a  part  of  the  system  all  that  must  un- 
avoidably go  with  it.  As  already  explained  Single 
Tax  itself,  if  employed,  would  gradually  become 
the  most  complicated  of  all  if  equity  were  striven 
for. 

Taxation  a  Great  Social  Trial. 

It  would  seem  that  the  simplest  and  most  fund- 
amental way  to  permit  of  a  simple  taxing  method 
would  be  to  make  our  economic  system  equitable. 
Now,  how  shall  we  do  this?  Not  quickly,  of 
course.  The  imperfections  of  human  character 
among  rich  and  poor  alike  are  as  much  the  cause 
as  the  result  of  economic  injustice.  Life's  hard 
trials,  which  are  all  caused  by  human  failings,  are 
themselves  the  correctors  of  imperfections  in 
character,  and  experience  has  taught  the  world 
that  progress  in  this  line  is  slow.  Taxation  re- 
garded in  its  broadest  aspect  is  one  of  our  great 
trials  and  the  advancement  of  this  problem  is  one 
of  the  important  features  of  our  social  plan  now 
urgently  needing  attention.  When  we  have  adopt- 
ed ;i  well  advanced  plan  of  taxation,  we  may  feel 
certain  that  individual  and  public  character  has 
improved  and  that  we  are  on  the  way  to  make  the 
remainder  of  our  social  system  more  equitable. 

Agricultural  Land. 

If  all  agricultural  land  wen-  subject  to  exactly 
the  same  pest,  disease,  climatic  and  irrigation  con- 
ditions, and  if  it  were  uniform  in  quality  and 
availability,  and  if  all  crops  with  tin'  application 


62         UNTAXING  THE  CONSUMER 

the  same  degree  of  intelligence  and  industry  yield- 
ed the  same  profit  per  acre,  the  apportionment  of  a 
tax-free  minimum  of  land  and  the  levying  of  an 
equitable  land  tax  on  excess  holdings  would  be 
relatively  simple.  But  all  of  these  things  are  ex- 
tremely variable,  making  the  application  of  such 
a  tax  plan,  as  already  stated,  difficult,  pending  the 
acquisition  of  experience  in  applying  it  practically. 
The  same  thing  might  be  said  of  equitably  apply- 
ing Single  Tax  or  any  other  land  tax. 

Equalizing  Economic  Opportunity 
In  Agriculture. 

Certain  things  can  be  done  toward  equalizing 
and  making  more  readily  comparable  the  useful- 
ness, or  value,  of  different  parcels  of  agricultural 
land,  at  the  same  time  increasing  their  productive- 
ness and  availability.  In  urban  communities  City 
Planning  can  be  utilized  to  improve  and  equalize 
the  usefulness,  or  value,  of  business,  industrial  or 
residence  sites;  but  rural  land  values  cannot  be  so 
readily  benefited  by  methods  of  this  kind. 

For  reasons  of  necessity  and  practicability 
farming  lands  will  probably  be  the  first  to  be  acted 
upon.  Indeed,  a  good  start  has  already  been  made 
and,  as  soon  as  the  social  mind  turns  its  special 
attention  to  promoting  the  land  and  tax  problems 
for  the  general  good,  steps  will  be  systematically 
taken  to  equalize  the  worth  of  land  according  to 
its  classification,  so  as  not  merely  to  realize  im- 
mediate and  specific  results,  but  largely  to  equalize 
economic  opportunity  and  to  better  standardize 
or  socialize  whatever  agricultural  production  is 
essential  to  life. 

In  a  society  as  complex  as  it  is  today  it  is  an 
impossibility  for  any  individual  to  do  this  for  him- 
self, and  there  is  no  other  way  to  reach  economic 


UNTAXING  THE  CONSUMER         63 

equity  in  any  field  than  by  collective  action  which 
means  ultimately  governmental  action.  In  dif- 
ferent parts  of  the  country  there  are  already 
started  or  in  contemplation  plans  to  effect  im- 
provement in  the  productive  or  economic  value 
of  farms,  incidentally  making  them  more  uniform 
in  value.     Some  of  these  steps  are: — 

1.  Government  distribution  of  practical  and 
scientific  agricultural  knowledge. 

2.  Government  distribution  of  business  knowl- 
edge applicable  to  farming. 

3.  Co-operation  in  the  ownership  and  use  of 
such  things  as  public  irrigating  systems,  jointly 
operated  harvesting  machines,  etc. 

4.  Co-operation  in  marketing  through  state 
departments  or  mutual  marketing  associations. 

5.  Co-operative  storage— grain  elevators,  cold 

storage,  etc. 

6.  Co-operation  in  the  buying  and  manufac- 
turing of  fertilizers. 

7.  Farm  Loan  Banks,  or  "rural  credits". 

8.  State  Land  Settlement  systems. 

9.  Transportation  of  farm  products  by  Parcels 
Post,  motor  truck  lines  owned  co-operatively  or 
by  the  public  and,  later,  by  government-owned 
railroads.  Government  Freight  rates  at  that  time 
will  probably  be  partially  equalized,  in  order  that 
the  oosl  of  shipping  to  market  may  be  as  nearly 
uniform  ,i-  practicable  for  all  farmers  in  the  saim' 
marketing  district. 

10.  Extension  of  good  roads.  Such  roads  re- 
duce the  mileage  coal  of  hauling  and  consequently 
tend  to  equalize  die  cost  of  transportation  by 
private  means,  imikin^  the  value  of  land  more 
nearly  uniform. 

11.  Rapid  increase  in  number  of  secondary 


64        UNTAXING  THE  CONSUMER 

schools  in  rural  districts,  offering  good  agricultural 
courses. 

12.  A  system  of  reporting  local,  as  well  as 
general,  prospective  crop  and  market  conditions. 
This  will  doubtless  soon  be  inaugurated,  in  order 
that  over-production  and  under-production  may 
be  moderated  and  prices  steadied. 

13.  Great  extension  and  improvement  of  the 
present  "farm  advisor"  system,  operated  in  con- 
nection with  universities.  Through  this  the  farm- 
er is  advanced  in  professional  and  business  knowl- 
edge relating  to  agriculture.  The  purpose  in  part 
is  to  inform  and  aid  him  regarding:  a,  the  agri- 
cultural value  of  land  he  purchases  from  the  State 
Settlement  Board,  and  the  uses  to  which  it  can  be 
put  most  profitably ;  b,  what  the  crop  requirements 
are  likely  to  be  for  the  following  season.  In  this 
connection  the  farmer  will  also  be  given  such  in- 
formation as  will  enable  him  to  draw  his  own  con- 
clusions in  regard  to  crop  conditions;  c,  the  latest 
discoveries  concerning  the  care  of  the  crops  a 
farmer  has  planted;  d,  the  latest  ways  of  keeping 
records  covering  the  results  of  his  work,  in  order 
that  the  farmer  may  determine  the  value  of  his 
efforts  and  strive  for  better  farming  methods;  e, 
the  introduction  of  collective  production  to  its 
practical  limit;/,  co-operative  marketing  associa- 
tions. 

Through  Farm  Advisors  much  will  be  done  to 
increase  the  efficiency  of  agriculturists,  to  advance 
farming  as  a  profession,  to  stabilize  and  otherwise 
improve  farming  as  a  business, — all  of  which  will 
tend  toward  equalizing  economic  opportunity  in 
farming  and  the  intrinsic  worth  of  land  for  agri- 
cultural purposes,  and  will  also  tend  toward  sim- 
plifying the  land  problems  and  the  land-tax 
schemes  in  agricultural  districts. 


UNTAXING  THE  CONSUMER         65 

Equalizing  Farm  Values. 

By  the  selection  of  reasonably  productive  land 
the  foregoing  steps  will  make  farms  nearly  equal 
in  value,  provided  the  maximum  tax-free  units  are 
varied  in  size  so  as  to  aid  in  counter-balancing 
variations  in  quality  of  soil  and  difference  in  the 
availability  of  these  farms  to  markets,  etc.  The 
tax-free  area  of  each  farm  should  likewise  vary  in 
size,  according  to  the  number  of  dependents  sup- 
ported by  the  owner. 

MUST  STOP  SPECULATION. 

The  State  Land  Settlement  plan  of  California, 
together  with  affiliated  State  activities,  if  given  a 
fair  trial,  will  doubtless  accomplish  most  of  these 
objects  and  finally  settle  our  perplexing  land  ques- 
tion, so  far  as  it  relates  to  agriculture,  provided, 
speculation  in  the  land  coming  under  this  plan  is 
brought  to  an  end  relatively  soon  and  methods 
are  adopted  to  relieve  the  consumer  from  the  in- 
direct payment  of  land  taxes. 

By  the  terms  of  the  California  State  Land 
Settlement  law  of  1917  the  State  purchases  and 
sub  iivides  under  certain  safeguards  suitable  land 
for  a  farm  settlement,  and  develops  the  entire 
tract  with  roads,  an  irrigating  system,  model 
homes,  etc.  The  State  then  sells  farms  to  actual 
-'(tiers  at  cost  for  a  reasonably  small  payment 
flown  and  small  annual  installments,  with  a  low 
interest  rate  on  deferred  payments.  It  also  pro- 
vides these  settlers  with  such  Farm  Advisors  as 
may  be  necessary. 

Hut  until  taxes  on  farm  land  (as  well  as  on  im- 
provements) arc  eliminated,  the  consumer  will 
always  have  to  pay  them,  however  indirectly,  and. 
unless  a  minimum  use  of  the  land  be  exacted  bv 


66        UNTAXING  THE  CONSUMER 

the  State  as  a  condition  of  continued  ownership, 
and  a  proper  basis  be  established  for  determining 
its  maximum  selling  price  when  resold  by  the 
owner,  speculation  cannot  be  reduced  to  the  mini- 
mum and  the  work  of  the  State  Land  Settlement 
Board  will  never  result  in  the  good  it  seeks  to 
inaugurate. 

The  price  obtainable  by  any  owner  for  land 
purchased  by  him  under  the  state  colonization 
scheme  would  have  to  be  based  on  the  original 
amount  he  paid  for  it  to  the  State,  plus  the  amount 
of  taxes  subsequently  paid  on  the  land  towards 
public  improvements,  such  as  schools,  roads,  irri- 
gating systems,  etc.  Depreciation  and  obsolesence 
of  these  improvements  (and  deterioration  of  the 
land,  if  any)  would  have  to  be  deducted  so  as  to 
determine  the  allowable  maximum  selling  price. 
The  cost  and  present  worth  of  private  improve- 
ments on  each  farm  would  have  to  be  recorded 
annually  on  the  public  records  for  purposes  of  in- 
come taxes  or  other  reasons.  Thus  there  would  be 
a  reliable  appraisal  of  a  farmer's  entire  real  prop- 
erty; but  within  reasonable  limits  he  would  nat- 
urally be  free  to  sell  the  private  improvements  at 
any  price  he  could  obtain.  However,  there  would 
always  be  a  record  of  their  value  and  the  public 
should  have  the  right  to  acquire  the  property  by 
merely  adding  to  the  recorded  price  the  reasonable 
damage  for  losses  to  the  owner's  income  on  account 
of  being  thus  disturbed. 

Fixing  the  Selling  Price. 

Since  it  is  possible  that  regular  taxes  will  have 
to  be  levied  on  State  Settlement  Land  until  other 
lands  are  relieved  or  made  relievable  from  tax- 
ation, and  since  it  is  impractical  to  bring  this  about 


UNTAXING  THE  CONSUMER         67 

until  laws  and  rules  establishing  "minimum  use" 
for  all  land  can  be  applied  in  practice,  the  assessor 
will  have  to  tax  these  "settlement  lands"  annually 
for  some  time  to  come  and,  in  doing  so,  he  can 
without  much  special  or  additional  work  appraise 
them  so  as  to  show  the  "maximum  selling  price" 
on  the  date  of  such  assessment.  In  this  appraise- 
ment work  Rural  Credit  Banks  may  be  of  service. 
The  maximum  selling  price,  as  already  explained, 
must  include  the  proportionate  value  of  public 
improvements  met  by  taxation  on  the  land.  If 
such  limitations  on  selling  prices  turn  out  to  be 
an  illegal  consideration  for  what  the  State  accomp- 
plishes  for  the  owner  through  these  colonization 
schemes,  they  should  be  made  legal. 

If  the  proposed  plan  were  to  be  adopted,  ade- 
quate laws  that  would  bring  about  the  following 
conditions  (already  noted  in  part  on  pages  39 
and  40),  would  be  essential: 

1.  A  tax-free  maximum  limit  in  area  of  land 
for  each  individual  owner. 

2.  A  minimum  use  to  which  every  kind  and 
class  of  land  may  be  put  as  a  condition  of  con- 
tinued ownership.  This  would  have  to  be  liberally 
construed  at  first;  but,  as  land  became  relatively 
scarcer,  the  restrictions  regarding  use  would  have 
to  be  increased. 

3.  A  maximum  price,  based  on  cost,  at  which 
any  parcel  of  "settlement  land"  may  be  resold  by 
the  owner. 

There  is  no  good  opportunity  at  hand  to  intro- 
duce such  laws,  except  in  connection  with  the 
State  Land  Settlement  scheme. 

A  Self  Expanding  Plan. 

This  Silt  lenient  plan  will  tend  to  direet  prac- 
tically all  of  the  business  of  subdividing  and  selling 


68        UNTAXING  THE  CONSUMER 

farm  lands  to  the  State  Land  Settlement  Board. 
If  the  land  be  freely  sought  by  settlers,  the  State, 
to  facilitate  business  after  the  scheme  is  well  de- 
veloped, will  probably  organize  County  Boards  as 
subsidiary  organizations  to  the  State  Board.  The 
present  small  private  owners  will  farm  their  lands 
as  heretofore  and  the  large  ones  will  hold  their 
land  until  the  State  Board  desires  it  for  sub- 
division purposes  and  in  the  meantime  will  either 
leave  it  idle  or  farm  it  by  grazing,  grain  growing, 
or  in  any  of  the  other  large  ways.  This  will  result 
in  no  injustice  to  any  of  the  present  land  owners. 
Indeed,  more  people  will  be  attracted  to  the  state 
and  the  land  will  be  subdivided  earlier  than  would 
otherwise  be  the  case,  and  the  large  landholder  will 
on  the  average  have  an  earlier  opportunity  to  dis- 
pose of  his  land  at  a  price  the  State  thinks  fair. 
The  small  farmers  in  common  with  the  state  will 
grow  more  prosperous,  and  business  conditions 
generally  will  be  better.  There  is  hardly  a  doubt 
that  self-interest  will  induce  owners  of  large  tracts 
aggregating  millions  of  acres  of  good  land  to  offer 
it  voluntarily  to  the  State  Board  at  moderate 
prices ;  but  should  it  not  be  thus  offered,  there  are 
several  ways,  if  any  must  be  employed,  to  induce 
the  owners  to  relinquish  their  holdings  at  satis- 
factory figures.  Surtaxes  on  large  tracts  would 
suffice  if  no  less  arbitrary  method  were  availing. 
Once  a  large  area  of  land  has  come  under  the 
State  Land  Settlement  plan,  and  once  its  sub- 
divided parcels  have  been  given  a  definite,  non- 
speculative,  official  selling  price,  it  will  become 
possible  to  gradually  extend  this  price  scheme  by 
voluntary  action  of  the  owners  to  all  other  agri- 
cultural land.  This  would  require  decades  to 
accomplish  in  its  entirety;  but,  before  a  half  million 
acres  have  been  disposed  of  by  the  Board  and  have 


UNTAXING  THE  CONSUMER         69 

Itecome  fully  producing,  the  problem  of  agricul- 
tural land  in  California  may  be  considered  solved. 
All  the  essential  details  for  operating  the  plan  will 
by  that  time  be  worked  out  and  its  momentum 
will  carry  it  over  the  entire  state.  After  this  stage 
of  the  land  problem  has  been  reached  one  of  several 
plans  may  be  adopted  by  the  State  to  acquire  by 
purchase  full  ownership  of  farm  land  (exclusive 
of  improvements). 

With  definite,  fixed,  legal  selling  prices  of  land 
established,  the  State,  when  it  is  older  and  richer, 
might  annually  purchase  a  one  percent  or  larger 
undivided  interest  in  each  parcel  of  land,  without 
acquiring  any  proprietory  rights  in  the  operation 
of  the  land  or  any  share  in  the  profits.  Thus  the 
fixed  selling  price  will  be  reduced  so  much  each 
year  between  seller  and  purchaser.  In  time  there 
would  remain  no  selling  price  and  long  before  that 
the  Income  Tax  will  probably  have  superceded  all 
land  taxes,  as  well  as  numerous  other  forms,  except 
possibly  a  nominal  tax  to  cover  the  administrative 
governmental  work  connected  with  land. 

After  the  State  Settlement  Board  has  accomp- 
lished enough  to  prove  the  plan  an  unquestioned 
success,  I  he  public  will  be  ready  for  similar  reforms 
in  practically  every  branch  of  the  great  land  ques- 
tion wherein  the  principle  will  undoubtedly  be  the 
same,  though  the  details  of  bringing  these  about 
may  differ  for  apparent  and  practical  reasons. 

Oner-  started  rightly,  the  State  Settlement  I'lan 
in  California  will  be  self-expanding  at  a  geomet- 
rically increasing  rate;  because,  on  account  of  our 
favorable  climate  and  continent-wide  markets,  we 
will  draw  farmers  from  the  cut  ire  country  and  even 
from  other  parts  of  the  world. 


70        UNTAXING  THE  CONSUMER 

Waste  and  Frugality. 

It  is  not  necessary  that  a  reform  in  our  land 
laws  during  peace  times  should  effect  a  great  in- 
crease in  food  production  per  capita;  for,  as  a 
whole,  we  have  had  nearly  sufficient  to  eat.  We 
cannot  profitably  consume  more  food  than  is 
wholesome  for  us,  no  matter  what  may  be  the 
demands  of  custom.  But  we  can  adopt  a  more 
extravagant  mode  of  cooking  and  serving  food, 
making  much  more  food  production  necessary. 
However,  in  such  case,  we  as  a  whole  people  shall 
have  less  inclination,  less  time  and  less  means  to 
live  the  higher  life  in  Nature's  playground  or  soli- 
tudes, in  the  universities,  at  social  gatherings,  in 
our  home  libraries,  or  at  public  lectures,  or  where- 
ever  an  individual  can  obtain  culture  and  expand 
the  soul. 

Still  there  is  no  narrow  limit  to  the  use  of  raw 
materials  produced  on  a  farm  or  ranch  for  indus- 
trial purposes,  such  as  cotton,  wool,  silk,  hemp, 
sisal,  flax,  oil,  hides,  and  for  the  manufacture  of 
industrial  alcohol,  potatoes  and  grain.  Indeed, 
in  the  consumption  of  such  agricultural  products 
we  can  be  very  wasteful.  For  instance,  we  can  all 
gradually  acquire  the  custom  of  wearing  a  new 
suit  of  street  clothes  every  week  or  month,  instead 
of  taking  reasonable  care  of  them  and  wearing 
them  six  months  or  longer.  Wastefulness  like  this 
would  have  the  same  bad  result  on  our  intellectual 
development  as  extravagance  in  the  use  of  food. 
But  without  wastefulness  in  manufactured  prod- 
ucts their  consumption  may  legitimately  increase 
several  fold  when  the  great  majority  of  workers 
receive  remuneration  that  will  enable  them  to 
supply   their  families  comfortably   with  articles 


UNTAXING  THE  CONSUMER         71 

made  of  these  products.  (See  foot-note) .  At  such 
a  time  naturally  more  farm  land  per  capita  will 
be  required  to  supply  the  needs  of  the  people,  not- 
withstanding intensification  in  production. 

Number  of  Agriculturists  Limited. 

In  a  country  that  is  highly  and  sensibly  devel- 
oped, the  ratio  of  farmers  should  never  be  larger, 
as  compared  with  the  rest  of  the  population,  than 
that  of  the  time  required  to  produce  the  farm 
products  of  the  country  as  compared  with  the 
entire  time  represented  in  producing  the  remainder 
of  the  nation's  outputs.  Assuming  that  the  farmer 
and  all  other  producers — industrial,  commercial, 
professional,  etc. — work  an  equal  number  of  hours 
in  an  average  day,  these  two  ratios  must  be  the 
same. 

However,  into  the  problem  enters  the  vexing 
and  difficult  question  of  how  much  intelligence 
and  energy  has  been  applied  to  the  work  done  by 
each  branch  of  the  population.  But  the  social 
intelligence  fortunately  is  becoming  stronger  in 
social  problems  and  by  conscious  and  direct  action 
it  is  at  last  beginning  to  weigh  and  regulate  both 
the  intelligence  and  energy  applied  to  our  great 
industries  or  activities.  This  will  result  in  a  great 
advance  in  our  social  program  and  also  will  make 
it  more  feasible  to  estimate  the  number  of  men 
necessary  for  employment  in  any  of  the  industries. 

At  present  about  half  of  the  population  of  the 
United  States  is  rural;  but  a  large  portion  of  this 
half  is  not  employed  on  farms.  Indeed,  it  is  prob- 
ably safe  to  say  that  less  than  two  thirds  of  our 
rural  population — less  than  one-third  of  the  people 
in  our  entire  country — consists  of  fanners,  farm 

Foot  Note: — Here  it  n,  of  eourie,  asaumed  that  lahor  will  firnt  pro- 
due*  the  increased  quantity  of  material!  and  uiukc  them  into  useful  article*. 


72         UNTAXING  THE  CONSUMER 

laborers  and  their  families.  Present  indications 
are  that  this  proportion  will  not  increase,  for  the 
reason  that  our  methods  of  production,  as  well  as 
our  wants,  change  as  civilization  grows,  and  we 
seem  to  require  an  increasing  percentage  of  people 
to  make  the  things  that  are  produced  elsewhere 
than  on  the  farm.  Unless,  therefore,  we  return 
to  the  simpler  life  of  the  past  as  a  whole  nation, 
dispensing  with  many  of  the  modern  requirements 
and  conveniences  (including  our  increasing  school 
facilities  and  the  refining  pleasures  of  music  and 
art  and  what  not),  we  shall  probably  never  again 
have  more  than  one-third  of  our  population  en- 
gaged in  farming  pursuits.  In  other  words,  we 
must  recede  toward  primitive  conditions  if  we 
adopt  the  "Back  to  the  Land"  movement  beyond 
actual  requirements.  Consequently,  by  solving 
the  farm  land  and  farm  tax  problems  we  shall 
leave  extremely  important  parts  of  our  tax  and 
land  questions  still  to  be  settled. 

This  all  refers  to  times  of  peace,  of  course.  If 
the  present  war  lasts  much  longer  and  we  must 
feed  half  of  Europe  for  an  indefinite  period,  con- 
ditions must  be  quite  different  in  these  respects 
until  after  a  world-wide  economic  equilibrium  has 
been  re-established.  But  for  immediate  war  pur- 
poses large  tracts  of  land  can  be  utilized  on  an 
extensive  scale  under  state  supervision,  if  neces- 
sary, so  far  as  men  and  equipment  are  available. 

Immeasurable  Good. 

If  farms  are  made  more  available  and  the  con- 
ditions of  farm  life  are  greatly  improved  through 
state  encouragement,  those  who  are  naturally  in- 
clined toward  farming  will  take  up  that  occupa- 
tion. On  the  other  hand,  those  engaged  in  it  and 
who  have  other  inclinations  can  sell  out  more 


UNTAXING  THE  CONSUMER  73 

easily,  because  the  business  and  living  conditions 
on  farms  will  be  more  satisfactory.  Thus  farm- 
ing, the  most  important  of  all  industries,  will  make 
great  strides  forward  and  fall  more  largely  into 
and  remain  in  native  American  hands,  to  the  im- 
measurable good  of  our  American  manhood.  As 
the  consumer  is  relieved  from  taxation  and  the 
citizen  is  taxed  according  to  his  income,  and  priv- 
ilege is  reduced  to  a  minimum  and  monopoly  made 
comparatively  harmless — all  through  wise  laws, 
good  and  enlightened  citizenship  and  men  specially 
trained  in  our  public  service — so  will  our  social  life 
advance  and  result  in  a  better  race  of  men,  pro- 
vided the  State  aids  in  making  agriculture  second 
to  no  other  occupation  in  desirability. 

To  reach  the  highest  state  of  which  society  is 
capable,  prices  of  some  essential  products  must 
be  regulated  and  others  must  be  produced  in  in- 
dustries that  are  public-owned  and  operated,  and 
all  kinds  of  land  must  in  the  end  be  made  practi- 
cally free  of  cost  and  free  of  all  but  nominal  taxes. 
I  feel,  without  any  proof  of  its  being  true,  that  for 
the  greatest  good  of  our  nation  the  land  problem 
must  be  settled  without  avoidable  injustice  to 
present  owners. 


FREE  WATER. 

Free  water  is  that  which  is  owned  by  the  public 
and  is  made  available  for  both  the  public  and  the 
individual  as  usable  water  or  as  electric  power; 
provided,  however,  that  no  charge  is  made  for  the 
water  itself,  all  charges  being  limited  to  the  cost 
of  making  it  available  for  use. 

For  water  to  be  free  it  must  be  supplied  to  the 
consumer  at  actual  cost  or  with  only  small  profits 
accruing  to  the  public  itself;  it  must  be  supplied 
without  the  extra  cost  arising  from  taxation,  or 
any  other  avoidable  expense. 

The  cost  of  water  made  available  for  use  by 
private  enterprise  should  and  must  cover  a  reason- 
able net  profit;  it  must  also  include  whatever  taxes 
are  assessed  against  the  business,  but  it  usually 
covers  avoidable  expenses  of  operation,  and  some- 
times an  income  or  profit  on  over-capitalization. 
We  can  never  obtain  free  water  from  private 
corporations. 

Only  under  public-ownership  of  water  can  such 
profit  be  eliminated  or  at  least  reduced  very  low, 
and  the  probability  is  that  only  under  public- 
ownership  can  taxes  on  the  water  industry  be 
wholly  done  away  with. 

The  price  of  free  domestic  and  irrigating  water 
should  be  sufficient  to  meet  every  necessary  item 
of  operating  expense.  Through  properly  charging 
off  depreciation  and  obsolesence  this  expense  in 
the  course  of  time  covers  the  cost  of  construction 
of  the  plant  itself. 

It  is  readily  seen  that  free  water,  delivered 
ready  for  use,  does  not  mean  water  without  cost 
to  the  consumer,  but  it  does  mean  water  at  a  price 
that  covers  neither  profit,  taxes  nor  unnecessary 


UNTAXING  THE  CONSUMER         75 

expenses,  and  above  all  it  means  no  interest  or 
profit  charge  on  a  capitalization  of  the  water. 

In  the  same  manner  the  price  to  the  consumer 
of  free  hydro-electric  current,  or  power,  must 
cover  like  expenses  of  the  power  industry. 

The  price  paid  for  the  free  use  of  our  navigable 
waters  must  similarly  cover  operation  and  main- 
tenance and  ultimately  include  the  cost  of  con- 
struction of  canals,  channels,  harbors,  locks  and 
docks,  and  other  engineering  works  which  make 
the  waters  available  for  use.  However,  in  the  case 
of  navigable  waters  this  price  is  paid  by  the  gen- 
eral public,  except  so  far  as  tolls  are  charged, 
which  must  be  met  by  the  consumer.  The  latter, 
however,  receives  the  benefit  of  the  price  that  is 
not  covered  by  tolls,  provided  that  advantage 
afforded  to  shipping  by  these  engineering  works 
is  reflected  in  the  shipping  rates. 

According  to  the  definition  of  free  water,  as 
herein  given,  the  consumer  has  long  had  the  use 
of  free  domestic  and  irrigating  water,  so  far  as  it 
has  been  public-owned,  and,  as  we  know,  it  is  so 
owned  quite  generally.  We  have  free  water  for 
navigation  and  good  laws  in  relation  to  it.  Here- 
tofore, however,  our  privately  owned  railroads 
have  to  a  very  great  extent  manipulated  the  public 
out  of  using  it,  though  this  situation  is  bound  to 
be  corrected  in  a  few  years. 

There  is  comparatively  little  free  water-power 
today,  although  the  need  for  it  is  urgent.  Why 
are  we  thus  backward?  The  production  of  power 
is  a  comparatively  new  enterprise  and  the  public 
is  naturally  conservative  in  extending  its  activities 
into  new  fields.  This  conservatism  has  been 
heightened  by  antagonistic  interests  who  try  to 
frighten  communities  into  leaving  the  water-power 


76         UNTAXING  THE  CONSUMER 

business  alone;  but  municipalities  generally  should 
make  careful,  extended  investigations  into  the 
feasibility  of  entering  into  the  power  business,  and 
in  unfavorable  cases  learn  how  to  make  it  feasible 
to  engage  in  this  branch  of  public  service. 


SUCCESSFUL  PUBLIC  OWNERSHIP 
SIMPLIFIES  TAXATION 

Foreword : 

The  development  of  our  invaluable  water  power 
resource,  if  left  to  private  corporations  under  laws 
like  those  proposed  thus  far,  will  enlarge  and  deep- 
en our  tax  question.  The  vexatious  problem  of 
land  taxation,  whether  the  one  now  existing,  or  the 
one  in  prospect  if  we  adopt  Single  Tax,  will  extend 
over  and  include  our  entire  resource  of  water- 
power. 

Should  what  remains  of  this  resource  be  devel- 
oped and  held  by  private  interests  and  be  taxed 
under  the  Single  Tax  plan  or  any  other,  the  con- 
sumer would  have  to  pay  the  assessment,  as  well 
as  a  liberal  profit  and  the  very  liberal  running 
expenses  of  the  corporations  involved.  Water 
power  is  especially  adaptable  to  public  ownership 
and  operation,  while,  on  the  other  hand,  conditions 
affecting  land  make  both  public  control  and  public 
ownership  of  land  less  simple  than  it  would  seem 
(as  shown  in  the  second  chapter). 

It  would  therefore,  be  doubly  wrong  to  grant 
ownership  of  water  power  to  private  interests  for  a 
term  of  fifty  years,  though  this  has  been  persist- 
ently urged  by  the  upholders  of  the  pending  water 
power  legislation. 

Were  the  public  to  develop  and  successfully 
operate  this  water  power,  the  tax  problem  in  re- 
gard to  it  would  bi'  eliminated.  Tuder  private 
ownership,  however,  the  consumer  musl  pay  the 
presenl  federal,  state,  county,  city  and  other  taxes, 
or,  if  Single  Tax  be  adopted,  he  musl  pay  an  equiv- 
alent of  such  taxes  on  the  power  site.     In  either 


78         UNTAXING  THE  CONSUMER 

case  let  us  say  the  combined  assessments  would 
be  from  three  to  four  percent  on  the  invested  cap- 
ital. The  consumer  must  also  pay  the  regular 
profit — seven  to  ten  percent — net  on  the  capita] 
employed.  To  this  may  be  added  at  least  two 
percent  for  deliberate  extravagance  in  operating 
expenses.  Here  we  have  a  probable  total  of  from 
twelve  to  sixteen  percent  of  the  capital  in  the  busi- 
ness applied  to  taxes,  profits  and  superfluous  ex- 
penses. In  the  case  of  public  ownership  and  oper- 
tion  the  consumer,  for  the  good  of  the  community, 
ought  to  pay  a  service  rate  yielding  a  net  profit  of 
about  four  or  five  percent  on  the  capital.  Pro- 
vided it  be  efficiently  conducted,  this,  as  compared 
with  private  ownership  of  power,  will  give  the  con- 
sumer an  advantage  of  seven  to  eleven  percent, 
not  speaking  of  greater  benefits  accruing  to  the 
general  public. 

ENERGY,  POWER,  LEGISLATION* 

Mechanical  energy  (as  distinguished  from  man 
and  horse  power),  which  in  this  article  is  consider- 
ed to  be  the  power  derived  from  coal,  oil  and 
waterfalls,  probably  furnishes  nine-tenths  or  more 
of  the  power  required  in  producing  everything 
used  by  man,  from  artificially  warmed  air  to  the 
Panama  Canal. 

Social  Meaning  of  Mechanical  Energy. 

If  we  should  gradually  lose  all  our  knowledge 
gained  since  the  time  of  Christ  in  respect  to  the 
development  of  mechanical  energy,  we  should 
revert  to  the  plane  of  civilization  of  His  time. 
Stronger  and  keener  intellects  would  use  the  weak- 
er for  their  man-power  and  direct  it  to  their  own 
advantage,  the  weaker  finding  judicious  submis- 

Foot  Note: — This  article  the  writer  prepared  for  the  "Out  We»t 
Magazine."  and  it  appeared  in  its  number  of  April,  1917. 


UNTAXING  THE  CONSUMER  79 

sion  the  best  attitude  to  take  in  the  matter.  This 
was  the  case  in  the  advanced  countries  two  thous- 
and years  ago.  On  the  other  hand,  if  we  reduce 
materially  the  cost  to  the  public  of  this  mechanical 
energy,  increase  the  supply  and  multiply  ways  of 
using  it,  it  ought  to  result  on  the  part  of  the  aver- 
age man  in  more  time  for  self-improvement,  and  a 
great  social  advance  would  naturally  follow. 

Materialistic  Reasons  for  Developing 
Water  Power. 

Hydro-electric  power  requires  less  human  effort 
to  produce  than  a  corresponding  amount  of  power 
derived  from  coal  or  oil.  It  is  perpetual  and  its 
present  use  does  not  lessen  the  future  supply,  as 
is  the  case  with  coal  and  oil.  It  is,  also,  less  ex- 
pensive. Again,  every  horsepower  of  hydro- 
electric energy  used  saves  just  so  much  coal  or  oil 
for  the  future.  We  should,  therefore,  develop  and 
use  our  water-power  as  rapidly  as  practicable. 

Coal  and  oil  have  special  uses.  Their  con- 
sumption for  power,  especially  where  hydro- 
electric energy  is  available,  should  be  curtailed 
and  they  should  be  conserved  as  far  as  possible  for 
these  special  uses,  both  for  present  and  future 
generations. 

Prepare  for  Competition. 

After  the  war  our  manufacturers  may  have  to 
be  relieved  of  all  avoidable  handicaps  in  order  to 
hold  their  own — even  in  home  markets  -against 
foreign  low-waged  competition.  Since  mechanical 
energy  enters  directly  and  indirectly  into  the  cost 
of  ;ill  manufactured  products  and  is  a  very  gre;il 
item  of  expense  in  railway  operation,  constituting 
a  large  pari  of  every  important  freight  rate,  it  is 


80        UNTAXING  THE  CONSUMER 

to  our  interest  that  it  be  furnished  to  all  users  at 
the  lowest  reasonable  price.  If  this  relief  is  not 
given  to  our  makers  and  transporters  of  goods,  the 
consumer  will  necessarily  have  to  meet  the  extra 
cost,  and  probably  many  articles  that  should  be 
made  here  will  be  manufactured  in  foreign  lands 
under  lower  wage  conditions,  and,  being  sold  here, 
will  weaken  our  industrial  structure.  Even  if  such 
goods  were  barred  from  entry  by  high  tariffs,  some 
weakening  would  take  place. 

Public  Ownership  Necessary. 

Before  the  present  generation  has  passed  nearly 
all  the  energy  required  to  run  our  factories  and 
railroads  and  nearly  all  of  the  current  for  lighting 
our  streets  and  buildings  should  come  from  our 
streams. 

To  furnish  electric  energy  without  material  net 
profit  beyond  what  is  necessary  to  cover  sinking 
fund  and  interest,  and  only  a  small  net  profit  after 
bonds  are  once  paid  off,  it  is  necessary  for  the 
public  itself  to  own  and  operate  our  great  electric- 
plants.  The  intrinsic  value  of  our  undeveloped 
water  power  is  far  greater  than  that  of  all  the  oil 
and  coal  still  to  be  extracted  from  the  soil  of  the 
United  States,  even  if  the  former  were  tanked 
ready  for  shipment  and  the  latter  were  in  bins 
ready  for  loading  onto  the  cars.  There  is  a  con- 
tinuous and  perpetual  supply  of  water  power  on 
the  earth's  surface  and  it  nseds  only  the  generat- 
ing plant  to  produce  current  and  the  distributing 
system  to  deliver  it  at  its  destination. 

A  Great  Donation. 

The  inclination  of  our  government,  judging  by 
the  legislation  recommended  in  1916,  seems  to  be 
to  place  this  invaluable  asset,  this  vital  national 


UNTAXING  THE  CONSUMER  81 

resource,  into  private  hands  under  conditions 
equivalent  almost  to  absolute  private  ownership, 
to  be  operated  first  and  foremost  for  private  profit. 
To  be  sure,  the  proposed  law  provides  for  "recap- 
ture" by  the  public  in  fifty  years  and  for  public 
regulation  in  the  meantime;  but  these  provisions 
are  worded  in  most  general  terms,  really  strength- 
ening private  owners  in  their  possession.  They 
seem  to  have  been  worded  by  corporation  lawyers, 
and,  when  it  is  said  that  the  proposed  water  power 
laws  grant  unrestricted  private  ownership,  it  is  the 
practical  truth.     (See  foot-note.) 

What  Ought  We  to  Have? 

Any  government  official  who  favors  laws  which 
are  hostile  or  detrimental  to  the  introduction  of 
public  ownership  of  power,  even  at  the  end  of 
fifty  years,  doubtlessly  believes  the  public  incom- 
petent to  learn  to  serve  itself  with  this  natural 
resource. 

Is  the  public  thus  incompetent  and  bound  to 
remain  so?  I  do  not  believe  it.  Should  such  laws 
be  tolerated  by  our  present-day  Americans?  If 
not,  what  should  be  done?  We  should  make  laws 
favoring  the  transition  of  water  power  from  private 

Foot  Note: — In  the  spring  of  1917,  when  the  above  was  written,  the 
friends  of  public  ownership  of  water  power  were  working  hard  against  the 
Shields'  and  similar  bills,  in  the  interest  of  better  power  laws,  and  they 
have  been  alert  ever  since.  However,  the  results  of  their  efforts  are  for  the 
most  part  still  unknown. 

Under  date  of  August  20,  1918.  an  Associated  Press  dispatch  waa  pub- 
lished as  follows: — 

(Bt  Associated  Press.) 

Washington,  Aug.  20. — "Debate  began  in  the  House  today  on  the 
administration  water  power  bill  providing  a  leasing  system  for  development 
of  power  projects  on  navigable  streams.  Representative  Ferris  of  Okla- 
homa, chairman  of  the  public  lands  committee  and  a  member  of  the  joint 
committee  on  water  power,  led  a  fight  for  modification  of  the  so-called  "re- 
capture clause"  so  as  to  give  the  Federal  Government  or  any  municipality 
the  right  to  take  over  plants  by  paying  the  actual  cost  of  the  development.  ' 

If  Mr.  Ferris  succeeds  in  this  fight,  a  great  step  will  be  taken  in  advance 
of  the  position  assumed  in  1 VII 6  by  a  large  majority  of  our  national  legislators. 


82        UNTAXING  THE  CONSUMER 

to  public  ownership;  we  should  frame  a  definitely 
outlined  set  of  principles  covering  the  regulation 
of  rates  charged  by  private  corporations  in  the 
meantime.  Recapture  clauses  should  provide  for 
purchase  at  any  time  by  cities,  counties,  states,  or 
our  federal  government,  at  prices  determined 
under  specifically  described  general  terms  ap- 
proved by  public-spirited  experts  and  patriotic 
men  familiar  in  detail  with  large  public-owned 
and  private  owned  industrial  enterprises;  in 
cases  of  purchase  of  electric  plants  by  the  public, 
these  clauses  should  provide  adequate  compensa- 
tion for  private  initiative,  enterprise  and  risk. 
The  laws  should  demand  scientifically  correct 
plans  and  substantial  construction — subject  to 
government  approval. 

Water  Works  as  an  Example. 

We  now  have  publicly  owned  municipal  water 
works  in  all  our  important  cities.  To  such  an 
extent  has  public  ownership  of  water  works  proved 
an  advance  over  private  ownership  that  it  is  diffi- 
cult to  imagine  the  impression  that  would  be 
created  today  by  a  large  city  permitting  itself  to 
be  supplied  by  private  works.  Cities  that  have 
engaged  in  the  manufacture  of  electric  current 
have  found  to  their  surprise  that  with  experienced 
men  at  the  head,  this  business  is  no  more  difficult 
than  municipal  water  works  to  operate;  in  fact, 
the  commercial  departments  of  both  these  activi- 
ties are  very  similar. 

LEGISLATION  OF  WATER  POWER 

The  following  points  should  be  weighed  by  our 
legislators  in  making  our  water  power  laws: 
1.     They  should  consider  whether  public  regu- 


UNTAXING  THE  CONSUMER  83 

lation  of  privately  owned  public  utility  corpora- 
tions is  practicable  as  a  permanent  plan. 

2.  They  should  bear  in  mind  the  fact  that 
public  ownership  of  electric  power  is  in  reality  the 
first  natural  step  towards  public  ownership  or 
absolute  control  of  railway  transportation. 

3.  Next  to  the  water  business  our  power  busi- 
ness is  the  one  that  seems  best  adapted  to  public 
operation,  but  we  shall  never  be  granted  good 
legislation  unless  our  legislators  fully  realize  the 
profound  importance  of  hydro-electric  energy  to 
the  social  and  intellectual,  as  well  as  the  industrial, 
progress  of  our  country.  This  statement  will  mean 
little,  unless  we  clearly  comprehend  the  awful 
results  that  would  follow  our  falling  behind  Eu- 
rope and  Japan  in  social  and  intellectual  progress. 
Since  this  progress  depends  on  industrial  advance- 
ment, which  in  turn  is  founded  principally  on 
mechanical  force,  our  social,  intellectual  and  even 
spiritual  strength  is  related  directly  and  closely  to 
mechanical  force,  and  only  less  directly  to  water 
power  legislation. 

Here  we  see  a  problem  which,  if  badly  handled, 
will  retard  social  and  intellectual  progress.  Inferi- 
ority will  be  our  lot  if  other  nations  treat  this  and 
kindred  problems  better  than  we,  and  foreign 
domination,  whether  open  or  sugar-coated,  recog- 
nized or  not,  will  be  the  outcome.  In  time,  such 
domination  will  irritate  us  and  war  will  result, 
with  probable  disaster  for  us.     (See  foot-note.) 

4.  Our  legislators  should  lake  into  accounl  the 
practicability  of  public  ownership  of  our  electric 

Foot  Nan: — Our  present  military  success  (August.  1018),  make*  this 
and  the  preceding  paragraph  seem  over-drawn.  Yet.  bb  long  us  tlie  nation 
u  iirinlilc  or  unwilling  to  keep  tied  successfully  opemte  its  own  water  power 
in  times  of  peace,  it  indicates  a  present  existence  of  inferiority  in  social 
advancement.  This  in  itself  shows  that  we  He  in  constant  danger  of  being 
out-stripped. 


84        UNTAXING  THE  CONSUMER 

power  business  and  should  provide  means  to  make 
its  success  more  certain.  Hydro-electric  courses, 
fostered  by  the  Government  in  our  State  Univer- 
sities, would  promote  this  end. 

5.  They  should  bear  in  mind  the  fact  that,  as 
population  becomes  more  dense  and  society  more 
complex,  no  country  can  hold  its  own  intellectual- 
ly and  spiritually  against  the  onward  tread  of 
civilization,  unless  industrial  effort  is  conducted 
with  a  corresponding  growth  of  efficiency,  one 
requisite  of  which  is  low-priced  mechanical  energy. 

6.  They  should  weigh  deeply  the  increased 
risk  to  our  economic  welfare  of  the  tampering  with 
politics  and  the  debauching  of  our  local  adminis- 
trations occasioned  often  without  premeditated 
design  by  nearly  every  private  utility  corporation 
added  to  a  community. 

7.  They  should  note  that  it  is  to  the  interest 
of  private  power  corporations  to  keep  the  public 
from  engaging  in  the  power  business  for  two  main 
reasons :  First,  through  an  extension  of  the  public 
ownership  of  power  the  rapid  numerical  increase 
of  private  power  corporations  would  be  checked 
and  they  would  therefore  not  have  so  great  a 
number  of  employees  and  stockholders  to  back  the 
efforts  of  hired  expert  persuaders,  whose  meddling 
with  legislation  has  heretofore  given  us  laws  in- 
consistent with  the  best  public  policy.  Second, 
after  engaging  in  this  enterprise  more  generally, 
the  public  would  learn  the  truth  about  the  cost  of 
manufacture  and  distribution  of  current  and 
would,  therefore,  be  in  position  to  regulate  the 
private  corporations  more  strictly,  more  intelli- 
gently and  more  justly. 

8.  Our  legislators  should  appreciate  the  fact 
that,  as  men  are  constituted,  it  is  practically  im- 


UNTAXING  THE  CONSUMER  85 

possible  for  any  group  of  individuals  carrying  on 
a  private  power  business  to  frame  a  power  bill  that 
will  be  fair  to  the  public;  that  few  men  are  avail- 
able who  are  trained  to  frame  such  a  bill  as  will 
adequately  safeguard  our  public  interests;  that  an 
adviser  who  does  not  insist  upon  the  public's  being 
protected  fully  is  neither  safe  nor  far-seeing  and 
should  not  be  followed. 

9.  Since  electrical  power  is  taking  the  lead  as 
a  driving  force  in  industry,  including  transporta- 
tion, and  since  the  cost  of  power  for  driving  ma- 
chinery is  one  of  the  important  elements  in  in- 
dustry, it  becomes  extremely  important  that 
electrical  power  be  furnished  to  industrial  enter- 
prises and  to  the  public  generally  with  strict  im- 
partiality and  at  the  lowest  practicable  cost. 
Government  operation  of  the  power  business  will 
soon  be  of  more  consequence  to  the  people  than 
Government  operation  of  our  postoffices. 

10.  If  impartial  service  at  the  minimum  feas- 
ible price  is  not  given  the  public,  advancement  in 
industrial  efficiency  will  be  retarded  and  the  con- 
sequences will,  of  course,  have  to  be  borne  by  the 
public.  This  would  not  be  so  serious  a  matter  if 
improvement  in  industrial  justice  did  not  depend 
largely  upon  a  better  industrial  efficiency  and  if 
advance  in  spiritual  development  did  not  in  turn 
rest  largely  upon  them  both. 

1 1 .  Our  legislators  should  consider  that,  prac- 
tically as  well  as  theoretically,  public  ownership 
of  our  most  important  utilities  would  stabilize  and 
strengthen  th<-  country  economically,  and   thai 

under  present    conditions   the   next  best    steps   in 

this  direction  are  to  obtain  good  water  legislation 
and  to  inaugurate  public  ownership  and  operation 
of  power.    It  is  true  thai  a  fair  quality  of  public 


86         UNTAXING  THE  CONSUMER 

character  is  required  to  conduct  successfully  public 
ownership  enterprises;  but  this  character  needs  for 
its  development  actual  experience. 

12.  Many  details  necessary  for  any  good  pow- 
er bill  can  be  supplied  only  by  men  who  have  had 
experience  in  the  actual  operation  of  public  power 
plants  and  who  have  experienced  and  mastered 
the  opposition  of  private  power  interests.  With- 
out the  assistance  of  men  possessed  of  such  exper- 
ience, combined  with  that  acquired  in  regulating 
the  rates  of  private  power  corporations,  the  best 
lawyers  or  legislators  must  fail  in  framing  a  power 
bill  that  is  fair  to  the  public.  There  are  only  three 
men  on  the  Pacific  Coast  that  I  know  of  who  are 
well  qualified  by  experience  in  both  theory  and 
practice  to  give  this  information.  There  must  be 
proportionally  few  in  other  parts  of  the  country. 

13.  Our  legislators  should  not  overlook  the 
fact  that  the  rate  of  industrial  development  has 
advanced  so  rapidly  in  late  years  that  a  lease  for 
the  next  half  century  of  any  natural  resource  would 
be  equivalent  from  a  business  standpoint  to  one 
covering  a  very  much  longer  period  in  the  recent 
past. 

14.  They  should  be  aware  that  the  people's 
attention  is  being  centered  on  improvement  in  our 
public  service.  Our  universities  are  becoming 
deeply  interested  in  the  subject,  and  this  is  des- 
tined in  hardly  more  than  a  decade  to  result  in 
a  supply  of  efficient  public  servants  for  all  kinds 
of  service,  even  in  public  utilities.  Our  electric 
power  will  doubtless  be  the  first  to  receive  the 
serious  attention  of  these  institutions. 

15.  They  should  fully  realize  that  our  most 
valuable  and  powerful  national  asset  is  the  young 
people  who  stand  ready  to  train  themselves  to  fill 


UNTAXING  THE  CONSUMER  87 

honorable  positions  offered  by  the  public  and  that, 
if  we  safeguard  our  great  undeveloped  natural  re- 
sources— such  as  power — and  through  the  medium 
of  our  institutions  of  learning  give  these  young 
citizens  the  necessary  practical  and  theoretical 
training  to  manage  these  resources  for  us,  we  shall 
be  on  the  scientific  road  of  true  progress. 

16.  Our  legislators  should  always  take  into 
account  the  fact  that  large  private  interests  of 
every  sort  naturally  co-operate  in  their  efforts  to 
obtain  favorable  legislation,  and  that  they  have 
the  finances  to  hire  the  best  legal  talent;  that 
private  interests  rarely,  if  ever,  work  for  legisla- 
tion that  safeguards  public  interest  as  against 
their  own. 

For  nine  years  I  have  closely  watched  the  strug- 
gle between  the  public  and  private  electric  power 
interests  of  Southern  California,  a  struggle  typical 
of  similar  controversies  elsewhere;  as  a  result  of 
these  observations,  I  have  lost  most  of  the  faith 
I  had  in  public  regulation  of  private  corporations, 
as  compared  with  public  ownership — provided 
there  are  available  trained  men  of  character  to 
manage  the  public  power  plants,  as  has  thus  far 
been  the  case  on  the  Pacific  Coast.  Under  these 
conditions  public  ownership  is  vastly  superior  to 
regulated  private  ownership  of  electrical  power. 


CONNECTION  OF  OUR  UNIVERSITIES 

WITH  THE  WATER  POWER 

PROBLEM.* 

One  of  the  most  important  economic  questions 
now  before  the  people  of  this  country,  is  the  pro- 
per development  and  ownership  of  their  unappro- 
priated water  power.  The  undesirable  Shields' 
Water  Power  Bill,  which  passed  the  Senate  on 
March  8,  1916,  should  be  defeated  in  the  House. 
(See  foot-note).  It  is  directly  opposed  to  the 
public  interest,  although  a  superficial  reading 
might  lead  to  the  belief  that  it  was  meant  to 
protect  the  public.  The  bill  provides  for  leasing 
water  power  sites  in  our  navigable  streams  to  pri- 
vate corporations  for  periods  of  fifty  years ;  but  it 
does  not  stipulate  that  with  reasonable  safeguards 
to  protect  private  investment  the  public  may  take 
over  the  power  business  whenever  it  is  prepared 
to  do  so.  Furthermore,  the  conditions  provided 
in  the  bill  for  the  recapture  of  power  by  the 
public  at  the  expiration  of  the  fifty-year  term 
are  utterly  against  the  interests  of  the  people. 

Foot  Note: — This  article  first  appeared  in  the  "Out  West  Magazine" 
of  April,  1916,  preceded  by  the  following  editorial  note: — 

"With  numerous  schools  operated  in  our  larger  cities,  financed  by  the 
great  corporations  of  the  country,  which  seize  upon  promising  young  men. 
mould  and  shape  them  at  no  little  expense  into  able  subalterns  with  the 
prospect  of  becoming  leaders,  Mr.  Thum's  suggestion  that  hydro-electric 
plants  be  added  to  the  equipment  of  our  state  universities  is  peculiarly 
pertinent.  It  is  inconceivable  that  the  Public  should  handicap  itself  with 
inefficient  employes,  yet  efficiency  comes  only  with  training.  As  presently 
constituted,  training  in  the  operation  or  manufacturing  branch  of  Big  Busi- 
ness can  be  secured  only  in  the  ranks  of  the  great  corporations  where  the 
student  becomes  impregnated  with  the  ideals  (?)  of  private  ownership  of 
public  utilities.  Public  ownership  of  electrical  energy  is  inevitable  despite 
attempts  by  private  interests  to  construct  fifty-year  obstructions,  such  as 
are  typified  by  the  Shields'  Water  Power  Bill." 

Foot  Note: — As  is  known  by  all  who  took  an  interest  in  the  matter, 
the  House  refused  to  pass  the  Shields'  bill  in  the  form  accepted  by  the 
Senate  and  the  entire  water  power  question  was  postponed.  But,  this 
question  is  now  (August,  191S),  again  under  consideration  by  Congress,  and 
the  reactionary  interests  that  were  behind  the  Shields'  Bill  are  doubtless  in 
better  fighting  trim  than  heretofore  and  should  be  closely  watched. 


UNTAXING  THE  CONSUMER  89 

The  passing  of  such  a  bill  can  seem  feasible  only 
to  those  who  do  not  realize  how  great  are  the  hard- 
ships which  its  bad  points  would  impose  upon  the 
public;  it  would  seem  advisable  only  to  those  who 
fail  to  appreciate:  first,  the  ineradicable  difficulties 
inherent  to  supervision  of  privately  owned  public 
utilities  by  the  government;  second,  the  ease  with 
which  the  public  itself  can  operate  an  electric- 
power  business,  when  certain  conditions  exist  that 
can  be  easily  created  and  maintained;  third,  and 
what  is  most  important,  the  fact  that  every  earn- 
est effort  made  by  the  community  to  maintain 
honest  and  efficient  operation  of  its  utilitieXele- 
vates  public  spirit,  strengthens  public  self -confi- 
dence, advances  public  morals,  deepens  public 
business  intelligence  and  promotes  public  peace 
and  contentment.  A  \ 

The  Public  owns  this  undeveloped  and  unap- 
propriated water  power;  yet  it  is  letting  it  all  pass 
into  the  hands  of  private  appropriators.  With  the 
exception  of  Los  Angeles,  Tacoma,  Marquette, 
Seattle  and  Holyoke,  no  cities  of  the  United  States 
seem  to  have  acquired  water  power  in  any  con- 
siderable amount  for  the  public  benefit. 

In  this  nation  are  many  universities  capable  of 
thoroughly  training  young  men  to  operate  hydro- 
electric plants,  provided  they  had  as  part  of  their 
equipment  a  model  plant  rendering  commercial 
service  in  a  large  way.  Most  states,  and  especially 
those.  Of  the  Pacific  Coast,  can  justly  boast  of 
possessing  a  sufficient  number  of  capable  young 
men  of  the  highest  character,  who,  in  order,  to 
serve  their  cities,  an-  ready  and  eager  t<>  take  up 
a  combined  practical  and  theoretical  electro 
engineering  course  at  any  of  I  In-  Universities  as 
soon  as  and  wherever  such  a  combined  course  is 


90         UNTAXING  THE  CONSUMER 

offered:  young  men  of  such  calibre  that  they 
would  probably  render  a  service  far  surpassing 
that  usually  given  in  privately  owned  hydro- 
electric plants  in  this  country. 

All  but  the  managerial  positions  in  these  works 
could  be  filled  with  the  best  students  who  are 
taking  an  electrical  engineering  course  and  who 
are  earning  their  way  through  college.  They 
might  be  given  employment  at  the  works  for  a 
sufficient  period  to  save  out  of  their  wages  approx- 
imately enough  to  pay  their  expenses  at  college 
for  a  full  semester,  and  return  to  the  works  again 
to  earn  the  expense  for  another  semester  the  fol- 
lowing year,  continuing  in  this  way  until  the 
entire  college  course  is  completed.  Naturally  it 
would  be  so  arranged  that  all  instructive  features 
of  the  work  at  the  plant  would  re-enforce  the 
theoretical  training  at  college,  just  as  they  are 
now  doing  under  the  "Co-operative  Plan"  intro- 
duced and  employed  with  increasing  success  by 
the  University  of  Cincinnati.  Where  nearby  sites 
are  not  available  these  power  plants  could  be 
many  miles  from  their  respective  universities  with- 
out causing  inconvenience. 

Now,  has  the  United  States  the  right  man  or 
set  of  men  to  initiate  the  necessary  laws  for  en- 
abling our  State  Universities  to  add  to  their  re- 
spective equipments  a  hydro-electric  plant  of,  say, 
50,000  or  100,000  horse  power  each  for  the  purpose 
of:  first,  giving  their  electrical  engineering  students 
the  best  possible  training  for  the  operation  of  pub- 
licly or  privately  owned  power  plants;  second,  ex- 
hibiting at  all  times  a  model  up-to-date  demon- 
onstrating  plant,  for  the  benefit  educationally  of 
communities  intending  to  engage  in  their  own 
power  business;  third,  learning  by  experience  all 


UNTAXING  THE  CONSUMER  91 

the  facts  necessary  to  regulate  the  business  of 
privately  owned  power  plants  as  justly  as  possible; 
fourth,  supplying  current  to  the  surrounding  ter- 
ritory? If  such  men  are  among  us,  as  undoubtedly 
they  are,  there  is  nothing  lacking  but  the  start. 
When  will  it  be  made? 

To  carry  out  this  plan  to  its  conclusion— public 
ownership — no  private  power  interest  need  be 
treated  unfairly.  Our  public  plants,  where  they 
come  into  competition  with  private  plants,  could 
serve  at  prices  that  would  leave  a  fair  margin  to 
the  private  corporations,  and  the  profits  accruing 
to  the  public  plants  could  be  used  to  apply  on 
their  extensions  or  on  the  gradual  purchase  of  the 
private  plants.  Serious  competition  between  pub- 
he  and  private  plants  would  not  be  necessary, 
since  the  demand  for  electric  current  will  always 
exceed  what  the  hydro-electric  plants  can  furnish. 
The  public  would  not  be  hurt  much  by  selling  to 
itself  at  a  profit  until  it  has  full  control  of  the 
field;  for,  if  it  continue  its  present  slow  methods 
of  extending  public  ownership  of  the  electric 
power  business  and  does  not  adopt  a  general  policy 
for  promoting  public  ownership  in  some  well 
ordered  manner  that  involves  the  most  thorough 
development  of  specialists  and  the  inauguration 
of  the  most  efficient  business  system  for  operating 
the  plants,  progress  in  this  line  will  be  seriously 
retarded,  making  such  service  as  a  whole  cost 
much  more  than  it  would  under  the  plan  above 
suggested. 

If  we,  the  Public,  have  in  the  past  depended 
upon  private  enterprise  to  supply  us  with  electric 
current,  because  we  have  been  too  gullible,  in- 
competent, indifferent,  or  corruptible  to  operate 
our  own  electric  power  plants  heretofore,  we  ought 


92         UNTAXING  THE  CONSUMER 

now,  if  we  enter  this  business,  to  protect  fairly  all 
private  owners  that  are  inclined  to  be  reasonable, 
'until  we  can  take  over  their  plants  on  a  just  basis. 

The  importance  to  our  country  of  public  owner- 
ship of  electric  energy  is  so  great  that  private 
owners  will  eventually  have  to  yield  to  the  inevit- 
able change  from  private  to  public  operation  of 
this  utility.  Then  why  should  not  we,  the  Public, 
prepare  to  enter  this  field  intelligently  and  express 
our  strenuous  opposition  to  the  proposed  law 
above  mentioned,  until  it  is  amended  so  as  to 
provide  adequately  for  the  acquisition  by  munici- 
palities of  private  power  plants  on  fair  terms  at 
any  time  during  the  life  of  the  fifty-year  lease 
contemplated  by  the  Government,  and  also  for 
the  establishment  by  each  state  of  a  large  com- 
mercial plant  for  operation  by  its  own  universities? 


.,  (,, 


AUTHOR'S  NOTE 

When  land  (and  this,  of  course,  includes  water) 
has  been  made  actually  free  and  prices  of  essen- 
tail  commodities  are  regulated  by  public  author- 
ity, and  successful  public  ownership  of  important 
public  utilities  is  extended  and  taxes  are  wisely 
levied  on  private  incomes,  then  only  will  the  con- 
sumer be  untaxed  and  our  great  tax  problem 
solved. 


93 


94  APPENDIX 

APPENDIX  I. 

The  following  statement  is  a  supplement  to 
the  introduction: 

In  this  book  when  speaking  of  the  Single  Tax 
theory,  I  consider  the  subject  as  it  was  published 
by  Henry  George  in  1879  and  promulgated  by 
his  followers  until  after  1911.  In  that  year  I 
attended  a  lecture  on  Single  Tax  given  by 
Joseph  Fels  and  Daniel  Keifer  who  were  the  two 
principal  advocates  of  this  system,  and  they  were 
still  adhering  to  Mr.  George's  plan  fully. 

During  this  period,  thought  on  Single  Tax  re- 
mained stationary  but  some  time  after  this  Single 
Taxers  began  to  think  more  seriously  upon  the 
matter.  They  divided  spontaneously  into  groups, 
some  holding  to  the  original  theory  strictly, 
others  accepting  modifications  of  it.  The  com- 
parative recentness  of  this  thought  activity  only 
indicates  that  the  whole  theory  needs  further 
serious  consideration 


APPENDIX   II. 

Referring  to  the  second  paragraph  under  the 
heading  "Avoiding  High  Land  Taxes",  (pages 
20  and  21),  it  is  not  as  clearly  expressed  as  it 
should  be.     What  follows  is  a  revised  form. 

I  can  readily  see  that  this  move  of  the  trusts 
to  reduce  the  land  tax  to  a  minimum  could  be 
frustrated  by  our  public  authorities.  If  given 
the  power,  they  could  arbitrarily  increase  the 
tax  and  thus  compel  a  rise  in  the  prices  de- 
manded by  these  raw  material  corporations.  To 
prevent  the  rise  from  being  entirely  shifted  onto 
the  consumer,  however,  the  taxes  would  have  to 


APPENDIX  95 

be  increased  to  such  an  extent  as  to  necessitate  an 
increase  in  prices  beyond  his  purse,  if  the  original 
amount  of  profit  were  to  be  covered.  In  this  in- 
stance the  consumer  could  not  do  more  than  to 
meet  the  burden  of  the  advance  up  to  the  limit 
of  what  "the  traffic  will  bear' ' .  The  only  remedy 
for  such  a  condition  would  be  to  lower  taxes  and 
to  make  government  price  regulation  so  thorough 
as  to  require  administrative  machinery  which 
would  suffice  for  the  public  operation  of  the 
trusts  themselves. 


APPENDIX  III. 

The  following  should  have  appeared  on  page 
li7  as  indicated. 

Capital  Investment  in  and  upon  Land. 

Capital  Investment  in  any  parcel  of  land,  as 
distinguished  from  capital  investment  upon  it  is 
a  sum  equal  to  such  part  of  the  taxes  as  have 
From  time  to  time  been  paid  on  the  parcel  for 
public  improvements  not  located  upon  it,  and 
otherwise  for  creating  conditions  necessary  or 
desirable  for  the  social  life  of  the  community. 
For  immediate  purposes  capital  investment  in 
land  does  not  include  money  that  may  have  been 
paid  for  its  location. 

Capital  investment  upon  land  is  the  money 
value  of  the  improvements  located  within  its 
boundries,  BUch  as  buildings,  wells,  drains,  sewers, 
fruit  trees,  crops,  etc.  If  interest  charges  are  an 
allowable  part  of  the  capital  investment  in  land, 
sueli  questions  as  tne  following  arise: 

First-  In    which  ease  may  interest   !>e  charged? 

Second:  How  is  tin-  interest  rale  In  be  deter- 
mined 


96  APPENDIX 

Third:  During  what  period  of  time  shall  in- 
terest be  allowed  ? 

Fourth :  Shall  any  rent  received  in  excess  of 
a  legally  permitted  income  be  deducted  from  the 
capital  invested  in  land? 

Unearned  Increments,  a  Revised  Definition. 

In  case  of  sale  or  reappraisal  of  land,  the  un- 
earned price-increment  is  the  amount  received  or 
appraised  in  excess  of  the  capital  invested  in  the 
property,  no  account  being  taken  of  any  addi- 
tional price  paid  for  location.  Now,  if  calcula- 
tions determining  the  amount  of  this  investment 
are  made  on  the  same  lines  as  those  covering  any 
other  kind  of  investment,  it  will  be  found  that  in 
a  vast  number  of  cases  there  is  no  unearned 
increment,  but  a  decrement. 

The  unearned  land-rent-increment  is  the  net 
amount  of  rent  received  in  excess  of  a  legally 
allowed  rate  of  income  on  the  capital  invested  in 
the  land,  additional  capital  paid  for  location  again 
being  disregarded. 

Rent  Survey  Desirable. 

It  is  quite  possible  that  the  total  of  all  land- 
rent  paid  in  the  United  States  is  but  a  fair  return 
on  the  aggregate  capital  investment  in  all  its 
land.  Now,  if  this  total  amount  of  such  land-rent 
could  be  and  were  equitably  distributed  between 
all  property  owners,  it  would  finally  reach  the 
consumer  in  as  just  proportions  as  is  possible 
under  our  present  economic  system.  No  injus- 
tice would  then  be  done  to  the  people;  for  it  is 
their  duty  as  consumers  to  bear  rents  on  these 
improvements,  if  just  in  amount  and  fairly  dis- 
tributed, as  a  part  of  the  legitimate  cost  of   the 


APPENDIX  97 

materials  and  services  they  purchase.  But,  on 
account  of  the  uncertainties  in  the  real  estate 
business  rents  are  not  and  cannot  as  a  rule  be 
equitably  distributed. 

It  seems  that  no  accurate  and  comprehensive 
survey  has  ever  been  made  of  the  rent  conditions 
in  the  United  States  to  determine  in  what  respect 
and  in  what  degree  these  rents  are  unfair.  Yet 
equity  is  the  basic  principal  of  true  progress. 


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